IRS Creates New Corporate Divorce Paperwork, Shareholders Pay
Published Date: 1/16/2025
Proposed Rule
Summary
The IRS is proposing new rules that make corporations and their shareholders report details about corporate splits and related deals over several years. These changes help show that these transactions don’t trigger immediate taxes. If you’re involved, get ready to share more info starting soon, and don’t miss the March 17, 2025 deadline to comment!
Analyzed Economic Effects
5 provisions identified: 2 benefits, 3 costs, 0 mixed.
Five-Year Annual Form 7216 Reports
If you are a corporation, shareholder, or other covered filer involved in a corporate split under section 355, you must attach a Form 7216 each year for a five-year reporting period. The form must be filed with one of the specified Federal income tax returns (for example, Forms 1120, 1065, 1120-S, or 1040) and permanent books and records relevant to the transaction must be retained and made available for IRS inspection. These rules apply to section 355 transactions occurring after January 16, 2025.
Million-Dollar Securities Basis Reporting Trigger
A holder of securities who receives stock or securities in a section 355 transaction is a 'significant distributee' if they owned securities in the distributing corporation with a basis of at least $1,000,000 immediately before the first distribution. Such holders will be subject to the reporting and record retention rules tied to significant distributees.
Higher 'Significant Distributee' Ownership Cutoff
The rule raises the ownership threshold that defines a 'significant distributee' for non-publicly traded stock from 1% to 5% by vote or value. That change alters which shareholders of a distributing corporation meet the threshold for specific reporting obligations under Sec. 1.355-5.
Small Business Coverage Estimate
The IRS estimates about 110 small businesses with gross receipts under $25 million would be subject to the information collection in these proposed regulations each year. The IRS certified that the proposed regulations would not have a significant economic impact on a substantial number of small entities.
Certain Entities Explicitly Exempted
Taxpayers that are not required to file one of the specified Federal income tax returns (for example, an estate, a trust, or a regulated investment company as defined in section 851(a)) are not required to file Form 7216 under these proposed regulations. The Treasury and IRS may request comments on whether additional return types should be added.
Personalized for You
How does this regulation affect your finances?
Personalize government policy and PRIA will tell you what this federal register document means for your household, plus every other regulation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.
Key Dates
Related Federal Register Documents
2026-20735, Extensions of Credit to Insiders
The FDIC is giving banks and insiders more time to share their thoughts on new rules about loans to insiders by extending the comment deadline to November 4, 2026. These rules aim to keep lending fair and safe, especially when insiders like executives or board members borrow money. If you’re involved with banks or interested in fair lending, now’s your chance to speak up before the final rules are set!
2026-20790, Application of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to the Refunded Portion of Certain Federal Refundable Tax Credits; Hearing Cancellation
The IRS canceled a public hearing set for October 14, 2026, about new rules on how certain refunded tax credits count as federal benefits under a 1996 law. This affects individuals who get refundable tax credits, clarifying how those refunds are treated but with no immediate money changes. Since no one signed up to speak, the hearing won’t happen, but the proposed rules are still out for public comment.
2026-20721, Requirements for Additional Traceability Records for Certain Foods: Enforcement Policy for Certain Retail Food Establishments and Restaurants; Draft Guidance for Industry; Availability
The FDA is sharing a draft plan about new food tracking rules that mostly won’t apply to certain stores and restaurants right now. If you run a retail food place or restaurant, you don’t have to worry about extra paperwork just yet, but the FDA wants your feedback by November 23, 2026. This helps them decide the final rules without causing extra costs or hassle for small businesses.
2026-20650, Low-Value Shipments
The U.S. Customs and Border Protection is proposing new rules to make importing low-value goods (under $2,500) easier and more electronic, especially for mail shipments. They want to add new data requirements for carriers and require bonds for some shipments to keep things safe and smooth. If you’re involved in shipping or receiving small packages, get ready to adapt by December 7, 2026, when comments on these changes close.
2026-20660, Optional Practical Training Fees
Starting soon, international students using Optional Practical Training (OPT) will face new fees: $70,000 for their first OPT and $30,000 for any extra OPT periods. This change aims to stop fraud and protect U.S. workers. If you want to share your thoughts, make sure to comment by November 9, 2026!
2026-20677, Airworthiness Directives; Various Helicopters
The FAA wants to update rules for helicopters with radio altimeters because 5G signals in Canada can mess with their readings. Pilots will need to follow new flight manual limits when flying in Canadian airspace to keep things safe. Comments on this change are open until November 23, 2026, and it mainly affects helicopter operators flying near Canada.
Previous / Next Documents
Previous: 2025-00113, Modification & Establishment of Class E Airspace; Cortez Municipal Airport, Cortez, CO
The FAA wants to update and add new Class E airspace around Cortez Municipal Airport in Colorado to keep flights safe and smooth, especially for pilots using instruments. These changes affect pilots flying in and out of Cortez and help manage air traffic better. If you have thoughts, send them by March 3, 2025—no costs or fees involved!
Next: 2025-00321, Guidance Regarding Certain Matters Relating to Nonrecognition of Gain or Loss in Corporate Separations, Incorporations, and Reorganizations
The IRS is proposing new rules to clarify when companies don’t have to pay taxes on gains or losses during big changes like splits, mergers, or reorganizations. These rules affect corporations, their shareholders, and creditors by explaining how stock, debts, and property exchanges are handled tax-wise. Comments on these changes are open until March 17, 2025, so businesses should pay attention to avoid surprises and plan their moves smartly.