With tax reform on the horizon, Treasury takes aim at three sets of regulations with clear cross-border implications. Our International Tax Group explains the department’s recommendations to scrap much of Section 385 and overhaul Sections 367 and 987.
Revoking the Section 385 documentation rules
Expanding the active business exception to foreign goodwill under Section 367
Deferring transition rules under Section 987 to 2019
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Treasury’s finalized debt/equity regulations under Section 385 run a daunting 517 pages. Our Federal Tax Group supplies a checklist for the transition period to full application of the new regulations.
Our International Tax Group explores the final debt-equity regulations under Section 385, highlighting significant modifications to the rules proposed last April. While the regulations remain controversial, the final version brings a number of taxpayer-friendly changes, including a reduction in scope and general delay in application.
A recent Tax Court case shows the government’s willingness and ability to attack financing arrangements that do not reflect arm’s-length debt standards, even without the forthcoming Section 385 regulations. Our International Tax Group analyzes that case and reviews the IRS’s decision to stop treating some FATCA intergovernmental agreements as “in effect.”