IRS Tax-Free Spinoff Proposal to Broaden Previous Guidance

Taxpayers should be aware that the upcoming IRS proposed regulations on tax-free corporate spinoff transactions will include a broader set of rules than the agency’s most recent guidance on the subject, which set off a wave of criticism among corporate tax lawyers.

IRS typically has validated tax-free spinoffs through private letter rulings, which are company-specific determinations from the agency that pre-approve actions from a tax perspective. But an IRS revenue procedure in May upended this system, putting stricter limitations on tax-free spinoffs and curtailing private letter rulings.

Mark Schneider, associate chief counsel at the IRS, said during a Wednesday ...