Partnership mergers. This ruling informs taxpayers that the Treasury Department and the Service intend to issue regulations under sections 704(c)(1)(B) and
737 of the Code implementing the principles of Rev. Rul. 2004–43. Rev. Rul.
2004–43 revoked.
Rev. Rul. 2005–10
Rev. Rul. 2004–43, 2004–18 I.R.B.
842, issued on April 12, 2004, addresses
the application of §§ 704(c)(1)(B) and 737
to § 704(c) gain or loss that is created in an
assets-over partnership merger. Rev. Rul.
2004–43 holds that § 704(c)(1)(B) applies
to newly created § 704(c) gain or loss in
property contributed by the transferor partnership to the continuing partnership in an
assets-over partnership merger, but does
not apply to newly created reverse § 704(c)
gain or loss resulting from a revaluation
of property in the continuing partnership.
The revenue ruling also holds that for purposes of § 737(b), net precontribution gain
includes newly created § 704(c) gain or
loss in property contributed by the transferor partnership to the continuing partnership in an assets-over partnership merger,
but does not include newly created reverse
§ 704(c) gain or loss resulting from a revaluation of property in the continuing partnership.
Some commentators have argued
that Rev. Rul. 2004–43 is not consistent with the current regulations under
§§ 704(c)(1)(B) and 737, and that the conclusions in the ruling should not be applied
retroactively. In response to these comments, the Treasury Department and the
Service intend to issue regulations under
§§ 704(c)(1)(B) and 737 implementing the
principles of Rev. Rul. 2004–43. The reg
ulations will be effective for distributions
occurring after January 19, 2005. See
Notice 2005–15, published in this issue of
the Internal Revenue Bulletin.
EFFECT ON OTHER REVENUE
RULING(S)
Rev. Rul. 2004–43 is revoked.
DRAFTING INFORMATION
The principal author of this revenue ruling is Laura Fields of the Office of Associate Chief Counsel (Passthroughs and
Special Industries). For further information regarding this revenue ruling, contact Ms. Fields at (202) 622–3050 (not a
toll-free call).
