Proposed Rule2025-12193
Regulations Under Section 382(h) Related to Built-In Gain and Loss; Withdrawal
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 2, 2025
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document withdraws two notices of proposed rulemaking containing proposed regulations on the treatment of built-in items of income, gain, deduction, and loss taken into account by a loss corporation after an ownership change. The proposed regulations would have affected corporations that experience an ownership change under section 382(h) of the Internal Revenue Code (Code).
Full Text
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<title>Federal Register, Volume 90 Issue 125 (Wednesday, July 2, 2025)</title>
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[Federal Register Volume 90, Number 125 (Wednesday, July 2, 2025)]
[Proposed Rules]
[Pages 28946-28947]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-12193]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-125710-18]
RIN 1545-BP07
Regulations Under Section 382(h) Related to Built-In Gain and
Loss; Withdrawal
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Withdrawal of notices of proposed rulemaking.
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SUMMARY: This document withdraws two notices of proposed rulemaking
containing proposed regulations on the treatment of built-in items of
income, gain, deduction, and loss taken into account by a loss
corporation after an ownership change. The proposed regulations would
have affected corporations that experience an ownership change under
section 382(h) of the Internal Revenue Code (Code).
DATES: As of July 2, 2025, the notices of proposed rulemaking that were
published in the Federal Register on September 10, 2019 (84 FR 47455),
and January 14, 2020 (85 FR 2061), are withdrawn.
ADDRESSES: Send paper submissions to CC:PA:01:PR (REG-125710-18), Room
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Lilia D. Stamm at (202) 317-3598 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On September 10, 2019, the Department of the Treasury (Treasury
Department) and the IRS published a notice of proposed rulemaking (REG-
125710-18) in the Federal Register (84 FR 47455) under section 382(h)
(2019 proposed regulations) that would have modified Sec. Sec. 1.382-2
and 1.382-7 of the Income Tax Regulations (26 CFR part 1). On January
14, 2020, the Treasury Department and the IRS published a notice of
proposed rulemaking (REG-125710-18) in the Federal Register (85 FR
2061) under section 382(h) (2020 proposed regulations) that modified
certain provisions in the 2019 proposed regulations.
The 2019 proposed regulations would have adopted as mandatory, with
certain modifications, (i) the safe harbor net unrealized built-in gain
(NUBIG) and net unrealized built-in loss (NUBIL) computation provided
in Notice 2003-65, 2003-40 I.R.B. 747, based on the principles of
section 1374 of the Code, and (ii) the ``1374 approach'' (as described
in Notice 2003-65) with respect to the identification of recognized
built-in gain (RBIG) and recognized built-in loss (RBIL).
The 2019 proposed regulations would have modified the rules in
Sec. Sec. 1.382-2 and 1.382-7: (i) to eliminate the treatment of
depreciation deductions on certain built-in gain assets as RBIG, in the
absence of actual gain or income recognized by the loss corporation;
(ii) to exclude adequately secured nonrecourse liabilities and all
recourse liabilities from the initial NUBIG/NUBIL calculation, and
treat post-change cancellation-of-indebtedness income as RBIG only in
certain circumstances; (iii) to introduce a ``consistency rule'' in
order to exclude certain change-date items allocated to the pre-change
period (as defined in Sec. 1.382-6(g)(2)) from the calculation of
NUBIG and NUBIL; (iv) to exclude prepaid income as an item of RBIG; (v)
to exclude dividends paid on stock during the recognition period (as
defined in section 382(h)(7)) as RBIG; and (vi) to exclude section 382
disallowed business interest carryforwards (as defined in Sec. 1.382-
2(a)(7)) as items of RBIL under section 382(h)(6)(B).
The 2019 proposed regulations reflected the view that the certainty
[[Page 28947]]
provided by the 1374 approach would streamline the calculation of
built-in gains and built-in losses for taxpayers and the administration
of section 382(h) for the IRS. In developing the 2019 proposed
regulations, the Treasury Department and the IRS also considered the
``338 approach'' (as described in Notice 2003-65) to be more complex
than the 1374 approach and to result in overstatements of RBIG and
RBIL.
The Treasury Department and the IRS received several comments in
response to the 2019 proposed regulations, many of which were critical
of the foregoing view. In response to the comments received, the
Treasury Department and the IRS are withdrawing the 2019 proposed
regulations and the 2020 proposed regulations.
The Treasury Department and the IRS are continuing to study the
issues addressed in the 2019 proposed regulations and expect to issue a
revised notice of proposed rulemaking regarding such issues. By the
terms of Notice 2003-65, taxpayers may continue to rely on the
approaches set forth therein for purposes of applying section 382(h) to
an ownership change that occurs prior to the effective date of
temporary or final regulations under section 382(h). See Notice 2003-
65, Part V.
Drafting Information
The principal author of this notice is Brian R. Loss of the Office
of Associate Chief Counsel (Corporate). However, other personnel from
the Treasury Department and the IRS participated in its development.
List of Subjects in 26 CFR Part 1
Income Taxes, Reporting and recordkeeping requirements.
Withdrawal of Proposed Amendments to the Regulations
Under the authority of 26 U.S.C. 7805, the notices of proposed
rulemaking (REG-125710-18) that were published in the Federal Register
on September 10, 2019 (84 FR 47455), and January 14, 2020 (85 FR 2061),
are withdrawn.
Edward T. Killen,
Acting Chief Tax Compliance Officer.
[FR Doc. 2025-12193 Filed 7-1-25; 8:45 am]
BILLING CODE 4830-01-P
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