INCOME TAX

T.D. 9609, page 655. REG–140437–12, page 676. Final regulations under section 1275 of the Code provide that a taxpayer must use the coupon bond method described in regulations section 1.1275–7(d) to account for Treasury Inflation-Protected Securities issued with more than a de minimis amount of premium. Temporary and proposed regulations under section 171 of the Code provide guidance on the tax treatment of a debt instrument with a bond premium carryforward in the holder’s final accrual period, including a Treasury bill acquired at a premium.

REG–140649–11, page 666. Proposed regulations under section 367 of the Code, amends the existing rules governing the consequences of failing to file gain recognition agreements (“GRAs”), or to satisfy other reporting obligations, associated with transfers of stock and other property to foreign corporations. Under current law, a taxpayer who transfers stock or securities to a foreign corporation and seeks to avoid recognizing gain on the transfer under section 367 generally must file a GRA. A taxpayer who does not file a GRA with its timely filed tax return for the year of the transfer, or otherwise fails to comply with the requirements of the GRA regulations, must recognize the full gain on the transferred stock, unless the taxpayer receives a determination that the failure to comply was due to reasonable cause. These regulations modify the standard that the taxpayer must satisfy to avoid full gain recognition, such that a taxpayer may avoid gain recognition by showing that its failure to file was not willful. Similar changes are made to the rules governing liquidating distributions to foreign corporations under section 367(e)(2).