The IRS said when it released the Notice that it intended to issue regulations under Internal Revenue Code section 721(c) “to ensure that, when a United States person transfers certain property to a partnership that has related foreign partners, income or gain attributable to the property will be taken into account by the U.S. transferor either immediately or periodically.”
The AICPA made a number of requests, including that the IRS clarify its authority for certain portions of the proposals and that the regulations include relief for taxpayers exercising due diligence and good faith in complying with detailed reporting requirements. In addition, the AICPA recommended several exceptions to the definition of an acceleration event, an increase in the dollar threshold of the tangible property exception and a delay in the effective date of the regulations. Acceleration events are certain specified transactions, occurring after the original property transfer, which generally reduce or defer the amount of built-in gain to be eventually recognized by the U.S. contributor.
While the Notice also announced that regulations will be issued under IRS Code sections 482 and 6662 applicable to controlled transactions involving partnerships to ensure the appropriate valuation of such transactions, the AICPA letter addresses only the intended regulations under section 721(c). The AICPA stated in the letter that additional comments on the intended regulations under section 482 and 6662 might be provided at a later time.