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
