Proposed Amendments to Check-the-Box Rules Should Be Narrowed, TEI Says.

The scope of the proposed rules relating to the check-the-box regime for entity classification is too broad, Tax Executives Institute told the Internal Revenue Service in April. Although the Treasury Department has described the rules -- which relate to "extraordinary transactions" occurring within a specified period of time before or after a change in entity classification -- as merely narrowing the operational provisions of the check-the-box regime, the regulations more closely resemble an anti-abuse rule of potentially broad scope, the Institute stated.

Stating that the two simple examples set forth in the proposed regulations provide precious little guidance to taxpayers, TEI commented that "it is difficult to determine the range of transactions covered by the proposed regulations." The Institute questioned whether the special rule for extraordinary transactions is even necessary. "Common-law principles (such as the step-transaction and substance-over-form doctrines), combined with anti-abuse rules set forth in the section 701 or 865 regulations, are sufficient to address legitimate concerns about the check-the-box regime," the organization stated, adding that the IRS has...