The current rules eliminate the distinction between "deferred" and "non-deferred" intercompany transactions, and between transactions unrelated to the corporate/shareholder relationship and those that are incident to this relationship. Eliminate distinction between deferred and non-deferred intercompany transactions. The approach of the current rules represents a significant departure from that of the old rules, in that the current rules eschew specific mechanical rules in favor of broad rules that can only be applied with a view to the purposes of the intercompany transaction rules and the single-entity theory.ģ. Thus, whereas the amount and location of items with respect to intercompany transactions continue to be accounted for on a separate-entity basis, attributes, holding periods, timing, source, and character are redetermined as necessary to produce the effect of treating the selling and buying members as divisions of a single entity. The current rules extend the application of the single-entity theory to intercompany transactions, including intercompany transactions involving stock or other obligations of members. The outline is intended to be an overview of the current rules and is not an exhaustive discussion of every aspect of the current rules.ġ. The purpose of this outline is to describe the current rules, including any changes made to the proposed rules, and to contrast them to the old rules addressing the treatment of intercompany transactions. These regulations were finalized on March 14, 1996. In addition, the Service simultaneously published temporary and proposed regulations governing the treatment of sales of stock of the common parent by consolidated group members. The current rules also include extensively revised regulations under § 267(f) (loss deferral on property sales between members). In addition to revising the rules for intercompany transactions, the current rules make minor conforming revisions to the regulations under § 108(b) (attribute reduction for debt discharge of an insolvent corporation), § 460 (accounting for long-term contracts) and § 469 (applying passive loss rules to consolidated groups). Notice of Proposed Rulemaking, CO-11-91, 59 Fed. The current rules contain various changes from the proposed regulations published in 1994 (the "proposed rules"). On July 18, 1995, the Internal Revenue Service (the "Service") published final regulations that revise the manner in which consolidated groups account for transactions occurring between members of the group (the "current rules"). Election for Stock Elimination Transactionsġ. Former Common Parent Treated As Continuation of GroupĬ. Successive or Multiple Intercompany TransactionsĮ. Deemed Satisfaction and Reissuance of Obligations Becoming Intercompany ObligationsĬ. Deemed Satisfaction and Reissuance of Intercompany Obligations Leaving The GroupĬ. Relief for Certain Liquidations and Distributions Consent to Treat Intercompany Transactions on a Separate Entity BasisĬ. Exception for Acquisition of Entire GroupĬ. Application of the Acceleration Rule to B’s Itemsĭ. Application of the Acceleration Rule to S’s ItemsĬ. Additional Examples Illustrating the Matching Ruleī. Limitation on exclusion of intercompany gain Intercompany Items and Corresponding Itemsĭ. Definition of an Intercompany TransactionĬ. Denomination of Selling and Buying Memberī. Summary of the Old Intercompany Transaction RulesĪ. Summary of the Current Intercompany Transaction RulesĬ.
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