SECTION 1. OVERVIEW

On September 22, 2014, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued Notice 2014–52, 2014–42 IRB 712. Notice 2014–52 announced that the Treasury Department and the IRS intend to issue regulations that will address certain transactions that are structured to avoid the purposes of sections 7874 and 367 of the Internal Revenue Code (Code), as well as certain post-inversion tax avoidance transactions. Notice 2014–52 also announced that the Treasury Department and the IRS expect to issue additional guidance to further limit (i) inversion transactions that are contrary to the purposes of section 7874 and (ii) the benefits of post-inversion tax avoidance transactions. This notice announces some of the additional guidance referred to in Notice 2014–52.

Section 2 of this notice describes regulations that the Treasury Department and the IRS intend to issue that will address transactions that are structured to avoid the purposes of section 7874 by (i) requiring the foreign acquiring corporation to be subject to tax as a resident of the relevant foreign country in order to have substantial business activities in the relevant foreign country; (ii) disregarding certain stock of the foreign acquiring corporation in “third-country” transactions; and (iii) clarifying the definition of nonqualified property for purposes of disregarding certain stock of the foreign acquiring corporation.

Section 3 of this notice describes regulations that the Treasury Department and the IRS intend to issue that will address certain post-inversion tax avoidance transactions by (i) defining inversion gain for purposes of section 7874 to include certain income or gain recognized by an expatriated entity from an indirect transfer or license of property and providing for aggregate treatment of certain transfers or

licenses of property by foreign partnerships for purposes of determining inversion gain; and (ii) requiring an exchanging shareholder to recognize all of the gain realized upon an exchange of stock of a controlled foreign corporation (as defined in section 957) (CFC), without regard to the amount of the CFC’s undistributed earnings and profits, if the transaction terminates the status of the foreign subsidiary as a CFC or substantially dilutes the interest of a United States shareholder (as defined in section 951(b)) (U.S. shareholder) in the CFC.

Section 4 of this notice describes corrections and clarifications that the Treasury Department and the IRS intend to make with respect to certain rules announced in Notice 2014–52.

Section 5 of this notice provides the effective dates of the regulations described in this notice, and section 6 of this notice requests comments and provides contact information.