26 CFR 1.367(b)-9 - Special rule for F reorganizations and similar transactions.
(1) That is described in section 368(a)(1)(F); or
(2) That involves -
(i) At least one foreign corporation that holds no property and has no tax attributes immediately before the transaction, other than a nominal amount of assets (and related tax attributes) to facilitate its organization or preserve its existence as a corporation; and
(b)Hovering deficit rules inapplicable. If a transaction is described in paragraph (a) of this section, a foreign surviving corporation shall succeed to earnings and profits, deficits in earnings and profits, and foreign income taxes without regard to the hovering deficit rules of § 1.367(b)-7(d)(2), (e)(1)(iii), and (e)(2)(iii).
(c)Foreign divisive transactions. [Reserved]
(d)Examples. The following examples illustrate the principles of this section:
|Separate Category||E&P||Foreign taxes|
(ii)Result. Under § 1.367(b)-7(d), as modified by paragraph (b) of this section, the pre-transaction deficit of foreign corporation A will not hover. Accordingly, foreign surviving corporation has the following post-1986 undistributed earnings and post-1986 foreign income taxes immediately after the foreign section 381 transaction:
|Separate category||E&P||Foreign taxes|
(ii)Result. Although the merger is a foreign section 381 transaction involving a foreign corporation with no property or tax attributes, paragraph (b) of this section does not apply because more than one foreign corporation with significant tax attributes is involved in the foreign section 381 transaction. Accordingly, under § 1.367(b)-7(d), foreign surviving corporation B has the following post-1986 undistributed earnings and post-1986 foreign income taxes immediately after the foreign section 381 transaction:
|Separate Category||Earnings & profits||Foreign taxes|
|Positive E&P||Hovering deficit||Foreign taxes available||Foreign taxes associated with hovering deficit|
(e)Effective date. This section shall apply to section 367(b) transactions that occur on or after November 6, 2006.