Page 40 - TaxAdviser_Jan_Apr23_Neat

TAX PRACTICE & PROCEDURES

Failure to file Form 952 may result in the IRS’s denying nonrecognition
treatment to a complete liquidation that would otherwise have
qualified under Sec. 332.

to receive, distributions of property beginning after the end of the tax year income tax returns; and (5) the events
from that subsidiary in complete of the first liquidating distribution. that occurred before the liquidation
cancellation or redemption of all of The memo says the IRS should assume plan was formally adopted. The memo
the parent’s stock in the subsidiary; that the ASED is the earliest possible also specifies who may execute Form
and (3) the subsidiary distributes all date and adjust that date later if it re- 952 on behalf of the parent for each
of its property within one tax year (the ceives information from the fourth year tax year.
one-year alternative) or within three after the first distribution. Chief Counsel Memo AM 2022-002
tax years (the multiyear alternative) The memo also clarifies that the reminds taxpayers that Sec. 332(b)(3)
after the close of the tax year during ASED is the same for all tax years dur- expressly requires filing Form 952 as a
which it made the first of a series ing which the parent received a liqui- condition of receiving Sec. 332 treat-
of distributions. dating distribution from the subsidiary ment in a complete liquidation under
When using the multiyear alterna- and for which it filed Form 952. the multiyear alternative. Again, failure
tive, the parent must file Form 952 Noting that sometimes it is not to file Form 952 may result in the
to waive the statute of limitation on clear when the subsidiary made its first IRS’s denying nonrecognition treat-
assessment for each of its tax years distribution, the memo explains that it ment to a complete liquidation that
that falls wholly or partly within the is the Office of Chief Counsel’s under- would otherwise have qualified under
liquidation period. The statute-of- standing that “the current practice is Sec. 332.
limitation waiver only applies to the to treat the taxable year for which the While the memo provides a useful
issues pertaining to the Sec. 332(b) initial Form 952 was filed as the year of overview of the ASED’s mechanics
liquidation. If the parent does not file the first liquidating distribution.” The when a Form 952 is filed, practitioners
Form 952 for all the years that fall memo recommends modifying that also would do well to consult the IRS’s
within the liquidation period, the IRS practice by thoroughly reviewing all Internal Revenue Manual Section
may deny nonrecognition treatment the information filed by the parent and 25.6.22.6.2.3.1, Liquidation of a Subsid-
that otherwise would have qualified subsidiary to identify the tax year in iary IRC Section 332 (11/17/21).
under Sec. 332. which the first distribution was made. The views expressed are those of the
Filing Form 952 extends the par- Specifically, the IRS should review: author and are not necessarily those of
ent’s period of assessment for at least (1) Form 952; (2) Form 966, Corporate Ernst & Young LLP or other members of
four years for each tax year for which Dissolution or Liquidation; (3) when the global EY organization.
it is filed. This extended period begins the first distribution was made; (4) From John Dilorio, J.D., LL.M.,
when the usual three-year limitation each statement the parent filed with its Washington, D.C. ■
period expires and ends four years (on
the ASED) after the later of (1) the
due date of the parent’s tax return for Contributors
the third tax year beginning after the
Regina Clark, J.D., is a director in PwC LLP’s Tax Controversy and Regulatory
end of the tax year of the first liquidat-
Services group in Washington, D.C., and a member of the AICPA Tax Practice and
ing distribution (without extensions)
Procedures Committee. Gloria Sullivan is a managing director in PwC LLP’s Tax
or (2) the date on which that return
Controversy and Regulatory Services group in San Francisco. Sullivan previously
is filed.
spent 37 years in tax administration at the IRS, including 20 years of LB&I leadership
Memo clarifies and seven years of executive leadership. John Dilorio, J.D., LL.M., is senior manager
ASED determination in EY’s National Tax Controversy Practice in Washington, D.C., and a member of the
AICPA Tax Practice and Procedures Committee. For more information about this
The memo addresses the question of
column, contact thetaxadviser@aicpa.org.
the proper ASED if the parent has not
yet filed its return for its third tax year

38 January 2023 The Tax Adviser