Wachtell Lipton explains IRS Elimination of Partnership Structures Intended to Avoid Corporate Tax on Dispositions of Appreciated Assets

[On June 11th], the Internal Revenue Service promulgated regulations eliminating a structure that used a partnership to avoid corporate level tax on the disposition by a corporation of an appreciated asset, the so-called “May Company” structure. The structure had been targeted by regulations that were proposed in 1992, but its status had been uncertain in light of subsequent legislative developments and the IRS’s failure to finalize the 1992 proposed regulations. The new regulations, issued in temporary form, address transactions in which a corporation contributes an appreciated asset to a partnership, and the partnership acquires stock in the corporate partner. Economically, … Read more