New IRS Guidance on Section 382 Recognized Built-In Gain/Loss Measurement

Notice 2018-30: Excluding Accelerated Cost Deductions Under Both Section 338 and 1374 Approaches

A live 110-minute CPE webinar with interactive Q&A


Thursday, December 13, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide a critical early look at recent IRS guidance on the proper application of IRC 168(k) immediate expensing allowance in calculating Section 338 Recognized Built-In Gain/Loss Measurement (RBIG/RBIL) on a change of ownership or entity form. The panel will discuss the application of Section 168(k) in calculating RBIG/RBIL under both of the existing approaches (Section 338 and Section 1374) and will detail the proper calculations for loss corporations changing ownership.

Description

A provision in the tax reform law which the IRS quickly identified as requiring further guidance was the interaction of the Section 168(k) accelerated depreciation allowance for "qualified property" with the methods set forth in Notice 2003-65 for identifying built-in items after an ownership change.

The IRS identified a potential loophole in the 168(k) extension of the immediate expensing provision to used property in the context of change in ownership of companies that will generate RBIG/RBILs. The statute, as written, appeared to allow companies to use the additional first-year depreciation to increase recognized built-in gain and reduce recognized built-in loss in the first year of the recognition period, with other distortions occurring during the remainder of the five-year recovery period.

The IRS issued Notice 2018-30 on May 8, 2018, to address this loophole. Under the Notice, loss companies must ignore the Section 168(k) bonus depreciation provisions in calculating its RBIG/RBIL after an ownership change. The Notice details the proper steps for calculating RBIG/RBILs under both the Section 338 approach and the Section 1374 approach in the existing standard for measuring RBIG/RBILs. The 2018 Notice applies to ownership changes occurring after May 8, 2018, which creates a gap between the effective date of Section 168(k) and the application of the new rules. Tax advisers need to understand the implications of the IRS position for loss corporations changing ownership.

Listen as our experienced panel provides a practical guide to the IRS guidance on the application of Section 168(k) immediate expensing in the measurement of RBIG/RBILs.

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Outline

  1. Existing framework for measuring RBIG/RBILs under IRC 382 and Notice 2003-65
    1. Section 382 provisions
    2. Section 338 approach to measuring RBIG
    3. Section 1374 approach
  2. Section 168(k) accelerated bonus depreciation provisions
  3. Notice 2018-30
    1. Potential impact/distortion of Section 168(k) bonus depreciation on RBIG/RBIL measurement
    2. IRS position on calculations
    3. Changes to 338 approach
    4. Changes to 1374 approach
  4. Guidance for loss corporations changing ownership during the transition period before May 8, 2018
  5. Planning implications

Benefits

The panel will discuss these and other important topics:

  • How the IRC Section 168(k) bonus depreciation provisions could be used to distort RBIG/RBIL measurements and what the impact of those distortions would be on loss corporations changing ownership
  • Terms of Notice 2018-30 and how it applies to both RBIL/RBIG measurement approaches under Sections 338 and 1374
  • Impact of loss corporations changing ownership during the period between passage of the tax reform law and the May 8, 2018 Notice

Faculty

Chapman, Amy
Amy Chapman
Managing Director
KPMG

Ms. Chapman works in the firm’s Washington National Tax practice on corporate taxation matters including...  |  Read More

Dyer, Marcus
Marcus E. Dyer, CPA, Esq.
Co-leader of Tax Controversy
WithumSmith+Brown

Mr. Dyer manages and reviews all aspects of federal and state tax compliance for C-corporation, S corporation and...  |  Read More

Reinstein, Todd
Todd B. Reinstein

Tax Partner
Pepper Hamilton

Mr. Reinstein focuses his practice on advising clients on federal corporate tax law, including the overall structuring...  |  Read More

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