Tax treatment liquidating distribution pfic
Until the ACFR grants it official status, the XML rendition of the daily Federal Register on Federal does not provide legal notice to the public or judicial notice to the courts.Proposed regulations issued by the IRS over 20 years ago are a source of confusion for some individuals with investments in passive foreign investment companies (“PFICs”).Unless otherwise provided under another provision of the Code, a loss realized on a disposition of stock of a section 1291 fund is not recognized.(Emphasis added) Some individuals believe that the bolded text prevents a loss from being recognized upon the disposition of stock of a section 1291 fund.For dispositions of stock of a section 1291 fund that qualify for nonrecognition treatment, see section 1.1291-6.
The stock of the section 1291 fund is treated as any other stock for purposes of loss recognition when disposed.Background Generally, under Section 337, a liquidating corporation does not recognize gain or loss on distribution of any property to an 80-percent distributee (defined in Section 337(c)) in a complete liquidation to which Section 332 applies.Absent a regulatory exception, Section 367(e) denies nonrecognition treatment under Section 337 where the 80-percent distributee is a foreign corporation. To qualify for the regulatory exception, the foreign distributee must use the distributed property in the conduct of a U. trade or business immediately after the distribution and 10 years thereafter, and the domestic liquidating corporation and foreign distributee must fulfill certain filing obligations.The transaction is intended to qualify as a complete liquidation of a subsidiary under Section 332.The taxpayer represented, among other things, (i) that the assets of USCo, other than U. real property interests and the stock of Opco 2 Sub, had been and would continue to be used in a trade or business for at least 10 years; and (ii) that USCo would recognize gain with respect to its distribution of any intangibles described in Section 936(h)(3)(B).