IRS Introduces Proposed Rules Tightening the “Device” and “Active Trade or Business” Tests

Recently, my colleagues Brian Blum and Jim Chudy published an interesting piece titled Five Things about the IRS’s Proposed Regulations on the Spinoff Device and Active Business Tests discussing the IRS’ recent proposal of long-anticipated  regulations tightening the “device” and “active trade or business” tests that are necessary for a corporation to distribute a subsidiary in a tax-free spinoff under Section 355 of the Internal  Revenue Code. The proposed rules are in response to widely publicized spinoffs in which tiny businesses were matched with large minority equity interests or pools of
investment assets.