A critical look at the earnings stripping regulations

Article Abstract:

The IRS was authorized to regulate earnings stripping on interest paid to foreign owners by the Omnibus Budget Reconciliation Act of 1989. IRC 163(j) was enacted to serve this purpose, but has been criticized for the additional complexity it would incur and the possibility of discriminatory taxation of foreign corporations in violation of bilateral tax treaties. In addition, the rule establishes a 1.5 to 1 debt to equity standard for determining deductibility of interest expense which has also been questioned.

Foreign corporations, Tax deductions

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Treasury's proposed regulations allow profit split method on self-developed intangibles

Article Abstract:

The IRS's proposed regulations on transfer pricing are a welcome step in the right direction. A new profit split rule would allow for a fairer determination of transfer price on transactions when separate parties involved each employ self-developed intangibles. The new rules also set the groundwork for future transfer-pricing that is based on internal data. The quantification of rates of return and other risk factors need to be better defined, but the IRS has taken a long overdue step.

Accounting and auditing, Transfer pricing

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The anti-conduit regulations: working through some additional examples

Article Abstract:

The anti-conduit IRS regulations enacted under IRC section 7701(l) fail to provide taxpayers engaged in international financing arrangements with sufficient guidance. The IRS has not provided safe havens or clear tests to avoid disregard of the intermediary. The IRS has only established factors that are considered in determining whether tax avoidance is one of the principle purposes. The regulations do not supercede treaty provisions. The regulations do provide a number of examples.

United States, Taxation, Tax planning, Loans, Related party transactions

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