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International Tax ADVISORY: Taxpayer Could Not Increase Foreign Tax Credit Due to Interest Expense Allocation

October 15, 2013 By Edward Tanenbaum and Heather Ripley

In Chief Counsel Advice 201336018, the IRS concluded that, in determining the interest expense allocation for foreign tax credit (FTC) purposes, the taxpayer’s adjusted basis in shares of a related foreign corporation should not be reduced by the principal amount of a loan, the interest on which is optionally payable in stock of the related foreign corporation. The advice reasoned that there was insufficient connection between the loan and the stock of the related foreign corporation to apply the special basis reduction rule of Reg. Section 1.861-12T(f).

The full alert is provided on the Alston & Bird website: www.alston.com/advisories/int-tax-oct-2013

Written by Edward Tanenbaum, Partner, Federal & International Tax | Alston & Bird LLP

Filed Under: International - Corporate Tax Planning, International Tax Advisory

About Edward Tanenbaum

Edward Tanenbaum is co-chair of the firm’s Federal & International Tax Group and a member of the firm’s Global Resources & Strategies Committee. Mr. Tanenbaum’s practice consists primarily of planning and structuring tax efficient solutions for cross-border business transactions and investments by foreign multinational corporations and high-net-worth individuals.

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About Heather Ripley

Heather Ripley is an associate in the firm’s Federal & International Tax Group. Her practice focuses on federal and international tax services for a range of clients, including domestic and international business entities and individuals.

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