New Guidance Affecting Spinoffs

Overview

When it comes to spinoffs, how will the new proposed regulations and revenue procedure issued by the IRS and the Treasury Department play out?

On July 14 and 15, 2016, the Internal Revenue Service (the “IRS”) and the Treasury Department issued new guidance affecting spinoffs.

The first set of guidance consists of proposed regulations (the “Proposed Regulations”) clarifying the application of the “device” prohibition and the “active trade or business” (“ATB”) requirement for tax-free spinoffs. The Proposed Regulations are generally consistent with the concerns described by the IRS in Notice 2015-59 (the “Notice”), issued in September 2015, and the “no rule” policy with respect to certain spinoffs put forth in Revenue Procedure 2015-43 (the “2015 Revenue Procedure”), issued concurrently with the Notice.

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