The IRS has finalized temporary regulations (T.D. 9594 ) under
Treas. Reg. Sec. 1.1502-13(f)(5)(ii)(B) that provide an election to
avoid immediate gain after certain Section 332 transactions.
Ordinarily, when a member sells the stock of a target within the
consolidated group to another member within the group, the selling
member has an intercompany item. That intercompany item may have to
be taken into account under certain circumstances even when the
target stock is never transferred outside of consolidation. One
such circumstance is if the stock of target is liquidated in a
Section 332 transaction with and into the buyer.
There is an election, however, that allows the taxpayer to defer
this gain if the taxpayer re-incorporates the old target into a new
corporation by transferring substantially all the assets of the old
target into the newly formed member. The election deems the
transaction to be a cross-chain reorganization and continued
deferral of the
