FIRPTA Relief For Inbound "F" Reorganizations

On August 19, the IRS announced guidance providing relief for certain non-U.S. corporations redomiciling into the United States. Notice 2025-45 (the "Notice") introduces an exception to the general rule requiring gain recognition on certain actual or deemed transfers of interests in U.S. real property held by a foreign corporation redomiciling into the United States through a "covered inbound F reorganization."

An "F reorganization" is defined as a "mere change in identity, form, or place of organization of one corporation, however effected." These transactions are generally tax-free to both the corporation undergoing the F reorganization and its shareholders. Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), however, when a non-U.S. corporation becomes a U.S. corporation in an F reorganization, it must generally recognize built-in gain on any interests it holds in U.S. real property (including U.S. subsidiaries whose value is mostly attributable