KPMG PPT - Tax Executives Institute, Inc.
KPMG PPT - Tax Executives Institute, Inc.
KPMG PPT - Tax Executives Institute, Inc.
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Unified Loss Rules<br />
Basis Reduction Rule – Lower Tiers<br />
When subsidiary being disposed of owns lower-tier subsidiary and the lower-tier<br />
subsidiary is not being transferred in the same transaction:<br />
► To determine the disconformity amount:<br />
► Basis in the lower tier subsidiary may be treated as reduced by a tentative<br />
reduction amount.<br />
► The tentative reduction amount is the lesser of the lower-tier subsidiary’s net positive adjustment<br />
and disconformity amount.<br />
► In case of multiple tiers of nontransferred lower tier subsidiaries:<br />
► Generally rules first apply to determine the tentatively reduced basis of<br />
stock of the subsidiary at the lowest tier. Then apply at each tier moving<br />
up the tiers.<br />
► The tentative reductions are treated as noncapital, nondeductible expenses<br />
that tier up under the principles of Treas. Reg. § 1.1502-32.<br />
©2012 <strong>KPMG</strong> LLP, a Delaware limited liability partnership and the U.S. member firm of the <strong>KPMG</strong> network of independent member<br />
firms affiliated with <strong>KPMG</strong> International Cooperative (“<strong>KPMG</strong> International”), a Swiss entity. All rights reserved.<br />
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