Todd B. Reinstein, a tax partner with Pepper Hamilton, was quoted in the July 16, 2019 Law360 article, "Four Federal Tax Regs to Watch in the Second Half of 2019."
Todd B. Reinstein, a partner at Pepper Hamilton LLP, told Law360 he hopes the Section 382 regulations follow the 2003 guidance issued in Notice 2003-65, which helped businesses figure out how to calculate net unrealized built-in gains and losses, but the IRS never issued any regulations explaining that notice, he said.
"I don't know what's in the reg package, but the stem of this goes back to the 2003-65 notice, which gave different methodologies for how to calculate built-in gains and built-in losses, and I would think that [would be] the cornerstone of those regs," Reinstein said.
Notice 2003-65 provides businesses flexibility by allowing for two ways to identify built-in gains, he said, and is important for many companies with significant losses because it allows them to make more use of NOLs if there is an ownership change.
However, the TCJA introduced an immediate expensing provision under IRC Section 168(k) to allow for a 100% first-year deduction for the cost of qualified property, which raised some questions on how to calculate built-in gains, Reinstein said.
The IRS addressed the issue in Notice 2018-30, which modified Notice 2003-65 and said that built-in gains and losses are determined without consideration of the 100% expensing rules of Section 168(k).
“They’re answering kind of old questions, but I believe they’re also going to answer some new questions that are coming up,” like how the built-in loss and built in-gain rules work with foreign corporations, he said.