Bulletin No. 2004-39 September 27, 2004

T.D. 9153, page 517. REG–124872–04, page 533. Final, temporary, and proposed regulations under section 7701 of the Code provide that some business entities may be recognized under state or foreign law as created or organized in more than one jurisdiction at the same time (“dually chartered entities”). These regulations provide clarification regarding how to determine the federal tax classification ( e.g., corporation, partnership, or an entity disregarded as separate from its owner) of a dually chartered entity and how to determine whether a dually chartered entity is domestic or foreign. A public hearing on the proposed regulations is scheduled for November 3, 2004.

REG–149524–03, page 528. Proposed regulations under section 1363 of the Code relate to LIFO recapture by corporations converting from C corporations to S corporations. The purpose of the regulations is to provide guidance on the LIFO recapture requirement when the corporation holds inventory accounted for under the last-in, first-out method (LIFO inventory) indirectly through a partnership. The regulations affect C corporations that own interests in partnerships holding LIFO inventory and that elect to be taxed as S corporations or that transfer such partnership interests to S corporations in nonrecognition transactions. The regulations also affect S corporations receiving such partnership interests from C corporations in nonrecognition transactions. A public hearing is scheduled for December 8, 2004.

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REG–128767–04, page 534. Proposed regulations under section 752 of the Code provide rules for taking into account the net value of a disregarded entity owned by a partner or related person for purposes of allocating partnership liabilities. Specifically, the regulations provide that in determining the extent to which a partner bears the economic risk of loss for a partnership liability, payment obligations of a disregarded entity are taken into account only to the extent of the net value of the disregarded entity.

REG–130863–04, page 538. Proposed regulations address the effect of transfers of the assets or the stock of parties to a reorganization pursuant to transactions intended to qualify as reorganizations within the meaning of section 368(a) of the Code.

Notice 2004–58, page 520. This notice sets forth a method that the IRS will accept for determining whether subsidiary stock loss is disallowed and subsidiary stock basis is reduced under regulations section 1.337(d)–2T, and requests comments as to what method should be adopted in prospective regulations.

Announcement 2004–69, page 542. This document withdraws proposed regulations (REG–165579–02, 2004–13 I.R.B. 651) that address the effect of transfers of the assets or the stock of parties to a reorganization pursuant to transactions intended to qualify as reorganizations within the meaning of section 368(a) of the Code.