Today, Treasury and the IRS released a correction to final and temporary regulations (T.D. 9770) under section 337(d) issued on June 8. The temporary regulations provide that a C corporation engaging in a conversion transaction involving a REIT within the 10-year period following a related section 355 distribution will be treated as making an election to recognize gain and loss as if it had sold all of the converted property to an unrelated party at fair market value on the deemed sale date. The correction clarifies that the temporary regulations will not apply to conversions in which the related section 355 distribution occurred before December 7, 2015, the date of enactment of a REIT spinoff prohibition in the Protecting Americans from Tax Hikes Act.