On January 13, 2025, the IRS and the Department of the Treasury released proposed regulations (the “Proposed Regulations”), which provide rules concerning tax-free spin-offs, in particular relating to the retention of stock or securities of a controlled subsidiary (“SpinCo”), and debt exchanges involving SpinCo stock or securities (“Debt Exchanges”). The Proposed Regulations also contain certain rules that affect tax-free transactions more generally, including rules regarding plans of reorganization and assumptions of liabilities. The Proposed Regulations expand on and modify previous guidance from May 1, 2024 (prior alert). The Proposed Regulations represent another signpost in the continuing evolution of the government’s views on such matters from its historical practices, and in some cases, a more pragmatic approach than that evidenced in the Rev. Proc. and the Notice.