(1) General rule. The profit recognition agreement must be signed under penalty of perjury by a representative of the U.S. seller authorized to sign under a general or special power of attorney, or by the party concerned based on the category of U.S. seller described in this subsection (e) (1). (i) the shares or securities of the foreign company of the purchaser. The basis of the shares or securities, as the case may be, of the acquirer`s foreign company received by the U.S. transferor at the time of the initial transfer will be increased by the amount of profit recognised from the date of the first transfer. (B) a calculation of the amount of the built-in gain on the transferred shares or securities that are the subject of the profit recognition agreement, taking into account the basis and fair value at the time of the initial transfer; (iii) The United States enters into a new agreement on the recognition of profits. The assignor described in paragraph (k)(14)(ii) of this section, which includes: An GRA provides parameters under which the U.S. assignor recognizes a profit in a transaction to which Section 367(a) applies if the foreign entity has transferred ownership during the five-year term of the GRA.
The terms of an GRA also describe certain “triggering events” that could result in the premature termination of the GRA and trigger recognition of the benefit of the transfer. When a triggering event occurs, the U.S. transferor must: (1) report the benefit of an amended return for the year of the transfer; (2) adjust the basis of the assets on which the result was recognised; and (3) pay additional penalties and interest on tax imposed from the recognition event.3 Failure to comply with the requirements of an GRA may result in severe tax outcomes for the negligent taxpayer. (9) Profit recognition agreement concluded in the context of indirect transfers of shares and certain triangular asset restructurings. With respect to a profit recognition agreement entered into in connection with an indirect transfer of shares (as defined in Article 1.367(a)-3(d)) or a triangular restructuring of assets within the meaning of Article 1.367(a)-3(e)(6)(iv), an indirect sale of the transferred shares or securities. For example, in the case of an indirect transfer of shares within the meaning of § 1.367(a)-3(d)(1)(iii)(A), a total or partial sale of the shares of the acquiring company. (B) Outcome. The transfer of the stock of TFC to DC by UST constitutes a triggering event in accordance with point 4 of paragraph j of this Section. However, pursuant to paragraph (k)(6)(i) of this Section, DC enters into a new profit recognition agreement in respect of the initial transfer that designates DC as the U.S. transferor, the transfer does not constitute a triggering event. (xiv) foreign company of the purchaser. Unless otherwise specified in this subsection (b) (1) (xiv), the recipient`s foreign company is the foreign company to which the transferred shares or securities are transferred in a first transfer.
In the case of an indirect transfer of shares, the foreign company of the purchaser has the meaning specified in § 1.367(a)-3(d)(2)(i). The recipient`s foreign company shall also include a company which, in the case of a new profit recognition agreement entered into under this Article, shall be called the recipient`s foreign company. (3) Joint parent company as agent of the US transferor. If the U.S. seller is a member but not the joint parent company of a consolidated group, the joint shareholder of the consolidated group is the representative of the U.S. seller in accordance with § 1.1502-77(a)(1). Therefore, the joint parent company must file the recognition agreement on behalf of the U.S. seller. References in this section to the timely return of the United States Where applicable, the seller must include the tax return filed in a timely manner by the consolidated group to which the U.S. seller belongs. (i) General rule. If, in the course of an intra-group transaction, the U.S.
transferor holds shares of the recipient`s foreign company received at the time of the initial transfer, this paragraph (k) No. 12 applies to such a sale to the extent that the intercompany transaction creates an intercompany element that is not taken into account in the taxation year in which the intercompany transaction takes place. To the extent that this paragraph (k)(12) applies, the injunction does not constitute a triggering event and the U.S. seller remains subject to the profit accounting agreement if the terms of paragraph (k)(12)(i)(A) and (B) of this section are met. If the intercompany transaction does not generate a intercompany item, see e.B. Subsection k(1) and subsection q(2)(xx) of this section. See point (o)(6) of this Section for the impact on a profit-accounting arrangement where an intra-group item resulting from an intercompany transaction to which this paragraph (k)(12)(i) applies is taken into account. E) Alternative facts.
A business-to-business transaction followed by a triggering event. Let us assume the same facts as in paragraph (q) (2) (xx) (A) of this section (the facts of this example 20), except that instead of USP selling the TFC share to X, TFC sells all the TFD shares in a transaction in year 4 that constitutes a triggering event in accordance with paragraph (j) (1) of this section. Pursuant to paragraph (c) (1) (i) of this Section, UST shall recognize 50 times the benefit under the Award Recognition Agreement. Pursuant to subsection (c) (4) (i) and (ii) of this Section, from the date of the first transfer, the basis of the TFC Share or TFC Share will be TFD Shares have been multiplied by 50. The standard, which applies to taxpayers seeking to avoid recognition by remedying premature or incomplete GRA returns, is revised to prove that the non-compliance is due to “reasonable cause and not intentional negligence” to prove that the breach was “unintentional” (Reg. .
