SECTION 8. TROUBLED COMPANIES

.01 Purpose . In response to comments received on Notice 2025-46, this section 8 clarifies the attribute reduction interim guidance for financially troubled companies provided in section 4.03 of Notice 2025-46 and clarifies and modifies the interim guidance provided in section 4.04(2)(a) of Notice 2025-46 regarding fresh start accounting gain and loss on non-transactional bankruptcy emergences. The Treasury Department and the IRS anticipate that the forthcoming proposed regulations will include proposed regulations under § 56A(c)(15) and (e) consistent with the guidance provided in this section 8.

.02 Application of § 1.1502-28 . For purposes of applying the attribute reduction interim guidance provided in sections 4.03(4) and (5) of Notice 2025-46, § 1.1502-28 applies.

.03 AFSI consequences resulting from emergence from bankruptcy . Solely with regard to the emergence from bankruptcy of a CAMT entity, the CAMT entity determines its CAMT consequences resulting from that emergence (and not from a discharge of indebtedness or a domestic covered asset transaction, as provided in sections 4.03 and 4.04(3)(a) of Notice 2025-46, respectively) by— (1) Disregarding any resulting gain or loss that is reflected in the FSI of the CAMT entity; and

(2) Determining the CAMT basis of any assets (other than the regular tax basis in the stock of a foreign corporation) of the CAMT entity by disregarding any adjustment to the AFS basis of those assets resulting from the emergence from bankruptcy.