Our International Tax Group explores a recent, heavily redacted Chief Counsel Advice applying the partnership abuse of entity rule to a Section 367(d) outbound IP transaction. Outbound IP transfers and Section 367(d) The partnership abuse of entity rule Interaction between the partnership abuse of entity rule and Section 367(d) successor rules Read the full advisory here. [...]Read more
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 Read the full advisory here. [...]Read more
The Treasury looks to slay Killer B transactions with its newest rules. Our International Tax Group follows the trail of glitches in the regulation.
Citing aggressive taxpayer positions, recently proposed regulations do away with the foreign goodwill exception to gain or income recognition for outbound transfers under Section 367. The rules also restrict the type of property eligible for the active business exception. Reasons for Change Per the preamble, taxpayers interpret Section 367 and the regulations in one of two ways when claiming favorable treatment of foreign goodwill and going concern value. One interpretation argues that goodwill and going concern value are not IP within the meaning of Section 936(h)(3)(B) and thus not subject [...]Read more
This November the IRS has given some taxpayers subject to reporting on outbound property transfers to foreign corporations something to be thankful for. Under Section 367(a) of the Code, if a US person transfers property to a foreign corporation in a Section 332, 351, 354, 356, or 361 transfer or exchange, the foreign corporation generally is not treated as a corporation for purposes of determining the US transferor’s gain on the transfer. This rule typically means that the US person will recognize gain on what would otherwise be a non-taxable transfer. The regulations offer exceptions [...]Read more