The Honorable Mark W. Everson

Commissioner of Internal Revenue Service

Room 5203

PO Box 7604

Ben Franklin Station

Washington, DC 20044

RE:      Comments on Notice 2005-74 Regarding the Effect of Certain Exchanges on Gain Recognition Agreements Under Section 367(a)

Dear Commissioner Everson:

The American Institute of Certified Public Accountants (AICPA) submits the attached comments on Notice 2005-74, Section 3.02, which were developed by the International Taxation Technical Resource Panel's Cross Border Mergers and Acquisitions Task Force and approved by the International Taxation Technical Resource Panel and Tax Executive Committee. We are considering other issues covered in the Notice and may provide additional comments in the future. The AICPA is the national, professional organization of certified public accountants comprised of approximately 350,000 members. Our members advise clients on federal, state, and international tax matters, and prepare income and other tax returns for millions of Americans. Our members provide services to individuals, not-for-profit organizations, small and medium-sized businesses, as well as America's largest businesses.

Notice 2005-74 announced rules to be included in the current section 367(a) regulations on the treatment of gain recognition agreements (GRAs) resulting from certain common asset reorganizations involving a U.S. transferor, a transferee foreign corporation, and a transferred corporation. Although the Notice provides much needed guidance, it also results in GRAs being triggered in several common corporate restructurings involving a U.S. transferor that previously filed a GRA.

As detailed in the attached comments, we recommend that a successor U.S. transferor in an asset reorganization (or the consolidated group’s parent, where the successor U.S. transferor is a consolidated group member) be permitted to assume the obligations associated with an original GRA for the remaining term of that GRA without triggering gain recognition. We also recommend that, under certain circumstances, a successor foreign corporation in the asset reorganization be permitted to assume the obligations associated with the original GRA for the remaining term of the GRA without triggering gain recognition. Finally, if the IRS and Treasury decide to provide relief for the types of transactions described in our comments, we recommend that taxpayers be allowed to elect the same type of retroactive relief that is provided in section 5 of the Notice.

We welcome the opportunity to discuss our comments further with you or others at the IRS. Please contact me at tpurcell@creighton.edu; Kenneth Wood, Chair of the AICPA International Tax Technical Resource Panel, at kenneth.wood@ey.com; Joe Calianno, Chair of the Cross Border M&A Task Force, at joe.calianno@gt.com; or Eileen Sherr, AICPA Technical Manager, at esherr@aicpa.org.

Sincerely,

Thomas J. Purcell, III

Chair, AICPA Tax Executive Committee

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