Summary
The IRS is currently considering extending the reasoning it used in Hamilton Industries regarding bargain purchases of inventory to IRC section 351 transfers of low-basis inventory. Under Hamilton, taxpayers that receive inventory at bargain prices cannot treat that inventory and new inventory as the same LIFO items. The separate treatment results in tax on the bargain element. In Letter Ruling 9446003, the IRS suggested that inventory originally purchased at bargain rates and then transferred under section 351 retains its distinctness from new inventory in the transferee's hands.
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Extract
Sec. 351 transfers as 'bargain purchases.'
In its continuing attempt to extend l the application of the decisions in: Hamilton Industries, Inc., 97 TC 120 (1991), and Kohler Co., 34 Ct. Fed....
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