Final rules determine how E&P is treated in corporate reorganizations
New rules under Sec. 381 will change which corporation succeeds to the tax attributes, including the earnings and profits (E&P), of the transferor or distributor corporation in certain acquisitions. T.D. 9700, issued on Friday by the IRS, also finalizes other related proposed regulations under Sec. 312 clarifying that, in certain corporate reorganizations, the “acquiring corporation” succeeds to the full E&P account of the transferor corporation.
The prior Sec. 381 regulations defined the acquiring corporation for purposes of transactions described in Sec. 381(a)(2) (relating to certain Sec. 368 reorganizations) as either the corporation that ultimately acquired all the assets the transferor corporation transferred or the corporation that directly acquired the assets the transferor corporation transferred if no single corporation ultimately acquired all the assets transferred in the transaction. Read more on the Journal of Accountancy.