IRS Move to Withdraw Merger-Loss Rules Buoys Critics’ Hopes

An IRS withdrawal of proposed regulations has given tax practitioners hope that the agency may yet retain companies’ preferred method for how to treat gains and losses acquired in corporate mergers.

The 2019 proposed rules on merger gains and losses, which the IRS withdrew July 1, would have hurt distressed companies and those that acquire them, practitioners said, by limiting an acquirer’s ability to use losses generated by an acquired company to defray its own tax bills. Some said that also would have broadly deterred companies’ willingness to invest in industries like high-tech and pharmaceuticals that involve significant risk.

Withdrawal ...