n-08-09.pdf

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# Part III - Administrative, Procedural, and Miscellaneous

## Effective Date Relief for Unified Rule for Loss on Subsidiary Stock

Notice 2008-9

On January 23, 2007, the IRS and Treasury Department issued a notice of
proposed rulemaking (REG-157711-02, 2007-8 IRB 537 [72 FR 2964]) under
§1.1502-36. The proposed regulations set forth rules applicable to transfers of
loss shares of subsidiary stock by members of a consolidated group. The IRS
and Treasury Department have received, and are considering, comments on the
proposed regulations.

While most comments will be addressed in the final regulations, there is
one concern that the IRS and Treasury Department believe appropriate to
address immediately. The concern relates to the proposed effective date, which
would make the regulations applicable to all transfers on or after the date such
regulations are published as final regulations in the Federal Register.

Practitioners have observed that the proposed effective date presents a
significant burden on taxpayers attempting to negotiate transactions prior to the
publication of the final regulations. The IRS and Treasury Department recognize
that it is inappropriate to impose this level of uncertainty on taxpayers negotiating
these transactions.

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Accordingly, the IRS and Treasury Department have concluded that the
regulations will generally apply to transfers on or after the date they are
published as final regulations in the Federal Register, but will not apply to a
transfer to an unrelated person if the transfer is pursuant to an agreement that is
binding before the date the regulations are so published and at all times
thereafter. The IRS and Treasury Department expect that the rule will incorporate
the provisions of section 267(b) in determining whether persons are related for
this purpose.

The principal author of this notice is Sean P. Duffley of the Office of
Associate Chief Counsel (Corporate). For further information regarding this
notice contact Sean P. Duffley at (202) 622-7770 (not a toll-free call).