Temporary and proposed regulations under section 337(d) generally treat a C corporation that engages in a conversion transaction involving a REIT within the ten-year period following a section 355 distribution as if the C corporation had elected deemed sale treatment. The final regulations also will cause a REIT that engages in a section 355 distribution within the ten-year period following a conversion transaction for which a deemed sale election has not already been made to recognize any remaining unrealized built-in gains and losses on the property that became property of the REIT. These proposed regulations would amend the temporary regulations to address situations where an inappropriate amount of gain may be recognized as a result of the predecessor-successor rule in the temporary and proposed regulations.