IRSProposed RuleMay 16, 2025

Previously Taxed Earnings and Profits and Related Basis Adjustments

Finance & Banking

Summary

This IRS regulation clarifies how corporations handle earnings that were already taxed once, and how they adjust the cost basis (the value used for tax purposes) of assets when those earnings are distributed. The rule aims to prevent double taxation and ensure fair tax treatment for businesses and shareholders when money moves between a corporation and its owners.

Key Points

1The rule defines how 'previously taxed earnings' work—money that a corporation already paid taxes on—to prevent the same income from being taxed twice
2It explains how companies should adjust the recorded value of their assets when they distribute or receive these previously taxed earnings
3The regulation affects corporations, partnerships, and their shareholders, particularly those dealing with complex ownership structures or international operations
4This is a proposed rule, meaning the IRS is seeking public feedback before making it final, with a comment period for businesses and tax professionals
5The changes help clarify tax law that has been ambiguous, reducing disputes between taxpayers and the IRS over how to handle these situations

Key Dates

Published

May 16, 2025

Read on Federal Register View Docket

This summary is for informational purposes only. It may not capture all nuances of the regulation. Always refer to the official text for authoritative information.