Two Days, One Bulletin, and a Very Busy Treasury
Internal Revenue Bulletin 2026-43, read so you would not have to: ETF seeding, Siemens, the 7520 rate, and four more.
The uninvited guest arrived early, brought a casserole, and had opinions about your ETF.
My favorite economist, Myron Scholes, liked to remind his students that “the taxing authority is an uninvited party to all contracts.” This week the uninvited guest arrived early, brought a casserole, and had opinions about your ETF. Internal Revenue Bulletin 2026-43 landed on Monday, and we spent two happy days reading it so you would not have to. Here is what we found most interesting, roughly in order of how much coffee each item required.
1. Treasury has a list, and it is checking it twice
In Notice 2026-62 and a companion revenue ruling, Treasury and the IRS named the fund strategies they consider too clever by half: seeding a new ETF with appreciated stock, exchange-fund variations on that trade, box-spread funds, and the “tax-aware” strategies that pair capital gains with ordinary losses. The ruling treats the classic ETF seeding trade as a taxable exchange, and because it offers no prospective-only relief, it can reach deals already done. Secretary Bessent did not mince words, saying Treasury is “serious about cracking down on transactions designed to dodge taxes.” Comments close October 28. If you seeded an ETF, joined an exchange fund, or your manager runs a tax-aware sleeve, this is a good week to call us. Our thanks to Morgan Lewis, PwC, Debevoise, Mayer Brown, Ropes & Gray, and EY, whose fast and careful write-ups made our reading far easier.
2. The Tax Court read the statute, and the IRS blinked (a little)
In Siemens Medical Solutions, the Tax Court held that Treasury’s “extraordinary disposition” rules, which halved the deduction for certain dividends from foreign subsidiaries, reach beyond what Congress wrote. Roughly $315 million of disallowed deductions came back. The IRS has now acquiesced in the result, though not in all of the reasoning. Funds and family offices that hold foreign subsidiaries through a U.S. corporation should check whether any open year deserves a refund claim. KPMG and PwC both published excellent summaries.
3. Rates jumped, and the estate planners noticed
The November section 7520 rate is 6.2%, up from 5.6% in October. Higher rates favor charitable remainder trusts and qualified personal residence trusts; they make GRATs, charitable lead annuity trusts, and note sales to grantor trusts harder to win with. If a November funding sits on your calendar, it is worth running the numbers again, and for transfers with a charitable component, October’s lower rate may still be available.
4. Equity swaps get two more years of the status quo
The section 871(m) phase-in now runs through 2028. Funds that give non-U.S. investors exposure to U.S. stocks through derivatives keep their current treatment, and their current paperwork, a while longer.
5. Crypto trusts may stake, with conditions
A revised safe harbor lets exchange-traded digital asset trusts stake their holdings without losing grantor trust status, provided they meet custody, indemnity, and distribution requirements. Existing trusts have six months from October 6 to conform.
6. Opportunity funds get homework
Proposed rules would require annual reporting from qualified opportunity funds and the businesses they own. A fund that voluntarily decertifies would trigger gain for every investor, so nobody should do that casually. The hearing is November 5.
7. A quiet gift for consolidated groups
Final rules provide that certain liabilities assumed in an intragroup section 351 transfer no longer reduce the transferor’s basis in the stock it receives. Small, but handy for portfolio company reorganizations planned before year-end.
Our take
None of this changes the seating chart; the uninvited guest is still at the table. It simply helps to know what it ordered. As always, we are glad to walk through any of these, and we would love to hear which item caught your eye.
Important notes
This alert summarizes guidance published in Internal Revenue Bulletin 2026-43 and the Tax Court’s Siemens Medical Solutions decision as of October 20, 2026. Read the guidance itself before relying on any point here; comment deadlines and hearing dates can move.
This client alert is for general information only. It is not tax, legal, investment, or accounting advice. Consult your own advisers about your particular circumstances before acting on any matter discussed here.
C . A . S .
Client alerts go out about once a week.
This alert is for general information only and is not tax, legal, investment, or accounting advice. Consult your own advisers before acting. Carlos A. Schmidt, MBT, MBA, CPA · carlos@lapresallc.com · (917) 558-6393.