Temporary regulations (T.D. 9814) released today, January 18, 2017, under Section 721(c) deny nonrecognition treatment to contributions of appreciated property by US persons to a partnership with foreign partners related to the transferor unless the partnership adopts the remedial method under 704(c) with respect to the transferred property and other requirements are satisfied. The temporary regulations generally adopt the rules outlined in Notice 2015-54, with some modifications made in response to comments on the Notice. The temporary regulations serve as the text for simultaneously released proposed regulations (REG-127203-15).

The temporary regulations generally apply to contributions occurring on or after August 6, 2015, or before August 6, 2015 resulting from entity classification elections filed on or after August 6, 2015, consistent with the effective dates announced in Notice 2015-54. However, any new rules, including any substantive changes to the rules described in Notice 2015-54, apply to contributions occurring on or after January 18, 2017, or to contributions occurring before January 18, 2017, as a result of an entity classification election filed on or after January 18, 2017. A Tax Alert on the regulations is forthcoming.