Monte Jackel Quoted in Tax Notes Today on IRS Withdrawal of No Net Value Proposals
Monte Jackel, senior counsel in the tax practice at Akin Gump, has been quoted in the Tax Notes Today article “IRS Withdraws Proposed Rules on No Net Value,” which reports that the Internal Revenue Service and the Department of the Treasury have withdrawn decade-old proposed regulations meant to compel an exchange or distribution of net value for some corporate formations and reorganizations to qualify for nonrecognition treatment.
Jackel argued that the proposed regulations, dating from 2005, “raised a number of complex issues” that the IRS may not have been able to figure out before dropping the effort. He said these issues included the computation of a liability, the definition of ‘liability,’ what to do if property is transferred with nonrecourse debt in excess of value and whether the principles of section 357(d) should be applied to determine if a liability is assumed.
Jackel also told the publication that he took issue with the withdrawal notice’s statement that current law surrounding section 351 is sufficient. “Since there was and is no case law under section 351 saying that net value is needed . . . it is not clear to me whether the current view of the IRS is that no net value is needed in a section 351 transfer,” he noted. “However, it is clear that the IRS believes net value is needed to apply sections 332 and 368, with some exceptions already reflected in final regulations relating to creditor reorganizations.”