Tax News

CCH (cch.taxgroup.com) reports:

  Final regulations have been adopted relating to the assumption of liabilities exception under Code Sec. 358(h). Code Sec. 358(h) provides that, after application of Code Sec. 358(d), the basis in stock received in a nonrecognition transaction shall be reduced to the fair market value of the stock by the amount of any liability assumed in the exchange.

  Temporary regulations were published in 2005 (NPRM REG 106736-00) and provided that the exception under Code Sec. 358(h)(2)( (for transfers of substantially all of the assets associated with the liability) does not apply to an exchange occurring on or after June 24, 2003. The IRS and the Treasury Department determined that removing the exception to Code Sec. 358(h) was necessary to prevent abuse. The final regulations adopted the provisions of the proposed regulations with no change and the corresponding temporary regulations were removed. Reg. §1.358-5 provides that the exception under Code Sec. 358(h)(2)( does not apply to an exchange occurring on or after May 9, 2008. For exchanges occurring on or after June 24, 2003, and before May 9, 2008, taxpayers are referred to Reg. §1.358-5T.

T.D. 9397, 2008FED ¶47,033

Other References:

 
Code Sec. 358

  CCH Reference - 2008FED ¶16,552E

  Tax Research Consultant

  CCH Reference - TRC CCORP: 3,202.10