IRS Issues Guidance Related to Determining Built-in Gain or Loss under Section 382

Recently released Notice 2018-30 provides that the two safe harbor approaches in Notice 2003-65–related to recognizing built-in gain or loss–will be determined without regard to the bonus depreciation rule under section 168(k). Section 382 imposes limits of the amount of built-in losses that can offset future taxable income following ownership change. The notice states that the additional first-year depreciation under section 168(k) for both the section 338 approach and, to the some degree, the section 1374 approach can create an inaccurate picture of the built-in gain or losses for the purposes of section 382 and thus should not be used in the related calculations.

Read more: Unintended Expensing Benefits Eliminated for Ownership Changes

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