Temporary SRLY regulations make improvements, provide opportunities, and create issues

Article Abstract:

The IRS has issued separate return limitation year (SRLY) temporary regulations under IRC section 1502 that replace the proposed regulations issued in 1991 to clarify the treatment of carryover net operating losses incurred by a consolidated group member while still separate. The new SRLY regulations allow the losses of members acquired in the same transaction to be combined, and loss limits can be based on the cumulative contributions of the subgroup, instead of individual members. The complexity of these SRLY regulations calls into question whether section 382 makes them unnecessary.

Corporate Tax Administration, Accounting and auditing, Corporate taxes, Tax administration, Loss deductions

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Update on TAM 9452002 and other affiliation developments

Article Abstract:

Litigation continues regarding the affiliated group tax issues raised in IRS Technical Advice Memorandum 9452002 and the Court of Federal Claims' ruling in IU International Corp. v. United States. The taxpayer in TAM 9452002 is litigating the IRS' finding that the 80 percent voting power requirement for affiliated group status was not met. The appeal in IU International Corp. v. United States is focusing on the meaning of undistributed profits and earnings under consolidated group regulations being applied to a spin-off of a subsidiary.

Corporate Income Taxes, Cases, Corporate divestiture, Divestiture, Allocation (Taxation), Tax allocation

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Section 446: a trap for the unwary in the treatment of transactions between members of a consolidated group

Article Abstract:

The IRS has established that consolidated group treatment of intercompany transactions is to be considered a change of accounting methods, and therefore, consolidated group taxpayers cannot amend prior returns or change current return status without IRS approval. Under IRC section 446(e), accounting method changes must be approved by the IRS. The IRS regulations asserting this position are a change from prior rulings and case law, and the change in policy will add to the complexity of intercompany transaction rules.

Tax accounting, Related party transactions

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