Final regulations: Non-applicability of section 357(c)(3)(A) to consolidated groups
Final regulations adopt proposed regulations with non-substantive revisions.
The U.S. Treasury Department and IRS today released final regulations (T.D. 10059) clarifying that, in the case of certain transfers between members of a consolidated group, a transferee’s assumption of liabilities to which section 357(c)(3)(A) applies will not reduce the transferor’s basis in the transferee’s stock received in the transfer.
The final regulations adopt proposed regulations issued in December 2024 with non-substantive revisions and, like the proposed regulations, reflect the Treasury Department’s and IRS’s view that the appropriate timing for the single basis reduction for an assumed section 357(c)(3)(A) liability is at the back end and that a front-end adjustment is not required.
The final regulations apply to consolidated return years for which the due date of the return (without regard to extensions) is after the date the final regulations are published in the Federal Register, which is scheduled to be October 16, 2026.