KPMG PPT - Tax Executives Institute, Inc.

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Intercompany Sale of Stock at a Loss Followed by a Section 332 Liquidation Example 2 30% of T stock B B cash T Stock: AB=$100 FMV=$10 S T S 70% 30% T ► ► ► ► B, S, and T are members of a consolidated group. S sells 30 percent of the T stock to B for $3 and S’s $27 loss is deferred. T later liquidates in a § 332 transaction (before any change in the value of the T stock). The attribute redetermination rule of Treas. Reg. § 1.1502-13(c)(1) recharacterizes S’s intercompany loss to produce the same results to the group as if S and B were divisions of a single corporation. Thus, S’s intercompany loss is redetermined to be a noncapital, nondeductible amount. ©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8
Section 267(f) – Final Regulations ► ► To the extent S's loss would be redetermined to be a noncapital, nondeductible amount under the principles of Treas. Reg. § 1.1502-13, but is not redetermined because of Treas. Reg. § 1.267(f)-1(c)(2) (which generally renders the attribute redetermination rule inapplicable to sales between members of a controlled group), S’s loss continues to be deferred…If the loss is deferred, it is taken into account when S and B (including their successors) are no longer in a controlled group relationship or to the extent of any corresponding income or gain recognized by B with respect to the property, whichever occurs first. For example, if S sells all of the stock of corporation T to B at a loss (in a transaction that is treated as a sale or exchange for federal income tax purposes), and T subsequently liquidates in an unrelated transaction that qualifies under § 332, S’s loss is deferred until S and B are no longer in a controlled group relationship. Similarly, if S owns all of the T stock, sells 30 percent of T’s stock to B at a loss (in a transaction that is treated as a sale or exchange for federal income tax purposes), and T subsequently liquidates into S and B, S's loss on the sale is deferred until S and B (including their successors) are no longer in a controlled group relationship. ©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9
Page 1 and 2: Tax Executives Institute Corporate
Page 3 and 4: Built-in Loss on Subsidiary Stock
Page 5 and 6: Section 267(f) - Background P P Unr
Page 7: Intercompany Sale of Stock at a Los
Page 11 and 12: Section 267(f) - Final Regulations
Page 13 and 14: Worthless Stock Loss Requirements f
Page 15 and 16: PLR 201149015 HC2 HC1 S1 S2 S3 HC2
Page 17 and 18: PLR 201149015 HC2 HC1 S1 S2 S3 HC2
Page 19 and 20: GLAM 2012-006 Situation 1 P $10 deb
Page 21 and 22: GLAM 2012-006 Situation 3 P $10 deb
Page 23 and 24: GLAM 2012-003 M Year 1 Year 2 Year
Page 25 and 26: Unified Loss Rules © 2011 KPMG LLP
Page 27 and 28: Unified Loss Rules $100 P S FMV $10
Page 29 and 30: Unified Loss Rules ► Basis redete
Page 31 and 32: Unified Loss Rules Basis Redetermin
Page 33 and 34: Unified Loss Rules Basis Reduction
Page 35 and 36: Unified Loss Rules Basis Reduction
Page 37 and 38: Unified Loss Rules Attribute Reduct
Page 43 and 44: CERT Rules If an “applicable corp
Page 45 and 46: Applicable Corporations ► An acqu
Page 47 and 48: Corporate Equity Reduction Interest
Page 49 and 50: Proposed CERT Rules On September 13
Page 51 and 52: Proposed CERT Rules Consolidated CE

KPMG PPT - Tax Executives Institute, Inc.

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