Gain Recognition Agreement Regulations Could Stand Some Clarification
Year: 2003
Type: preprint
Abstract: Code Sec. 367(a)(1) generally provides that if a U.S. person transfers property to a foreign corporation in a transaction that would otherwise qualify for nonrecognition of gain under Code Secs. 332, 351, 354, 356, or 361, then, for purposes of determining the extent to which gain is recognized, the foreign corporation is treated as if it were not a corporation. Since the enumerated provisions only apply where property is transferred to a corporation, the effect of Code Sec. 367(a), where it applies, is to cause the transaction to become taxable. Various exceptions are provided by statute. In addition, Code Sec. 367(a)(6) contains a broad grant of authority to Treasury to issue regulations providing exceptions to the gain recognition of rule of Code Sec. 367(a)(1). In practice, those regulations provide the applicable rules. This article considers several issues that are not consistently or appropriately addressed by those regulations. These issues relate to situations in which a taxpayer has already entered into a gain recognition agreement (a GRA) with respect to a prior transfer that was subject to the Code Sec. 367(a) regulations and there is a subsequent direct or indirect nonrecognition transfer involving some aspect of the property that was subject to the initial GRA.
Source: SSRN Electronic Journal
Language: English
Topic: Taxation and Legal Issues
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2272102006