[4830-01-p]
Published February 23, 2005
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
TD 9180
RIN 1545-BC29
Adjustment to Net Unrealized Built-in Gain
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final regulations under section 1374 that provide for
an adjustment to the amount that may be subject to tax under section 1374 in certain
cases in which an S corporation acquires assets from a C corporation in an acquisition to
which section 1374(d)(8) applies. These final regulations provide guidance to certain S
corporations that acquire assets from a C corporation in a carryover basis transaction.
DATES: Effective Date: These regulations are effective February 23, 2005.
Applicability Dates: For dates of applicability, see §1.1374-10.
FOR FURTHER INFORMATION CONTACT: Jennifer D. Sledge, (202) 622-7750 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document contains amendments to Income Tax Regulations (26 CFR part 1)
under section 1374 of the Internal Revenue Code, relating to the tax imposed on certain
recognized built-in gains of S corporations. Section 1374 imposes a tax on an S
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corporation’s net recognized built-in gain attributable to assets that it held on the date it
converted from a C corporation to an S corporation for the 10-year period beginning on
the first day the corporation is an S corporation and assets that it acquired from a C
corporation in a carryover basis transaction for the 10-year period beginning on the day of
the acquisition. A separate determination of the amount subject to tax under section 1374
is required for those assets the S corporation held on the date it converted to C status
and each pool of assets the S corporation acquired in a carryover basis transaction from
a C corporation. The total amount subject to tax under section 1374 for each pool of
assets is limited to that pool’s net unreal