IRS Issues Temporary Regulations Under Section 337(d)

The IRS issued temporary regulations under Treas. Reg. Sec. 1.337(d)-3T (T.D. 9722) that are intended to prevent corporate taxpayers from using a partnership to circumvent gain under Sections 311 or 336.

Congress enacted Sections 311(b) and 336(a) in the Tax Reform Act of 1986 (P.L. 99-514) to repeal what remained of the General Utilities Doctrine, which held that corporations could generally distribute appreciated property to their shareholders without recognizing gain (General Utilities & Operating Co. v. Helverling (296 U.S. 200 (1935)). Section 311(b) requires a corporation to recognize gain when it distributes appreciated property to its shareholders, and Section 336(a) provides for gain or loss to a distributing corporation when a liquidating distribution is made. Section 337(d) provides that Treasury will prescribe regulations to carry out the purpose of the repeal of the General Utilities Doctrine.