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US debt-equity special focus

11 February 2013

Joe Dalton

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US taxpayers who seek to exploit the differences in the tax treatment of debt and equity will need to prepare for more aggressive enforcement by the Internal Revenue Service (IRS). The decisions in three recent court cases, all featured in this International Tax Review special focus, suggest how companies could deal with this approach from the tax authorities.

Download the special report as a PDF

The IRS's fight against hybrid financing instruments is an issue US tax directors cannot afford to ignore.

Tax-minimising opportunities arise for multinationals when financing cross-border transactions because treatment of hybrid debt-equity instruments across jurisdictions is not uniform. And the US Tax Court has shown in recent rulings that tax planning, to benefit from such opportunities, is perfectly acceptable.

But the IRS does not like it and is increasingly challenging multinationals on the issue. This report analyses the Hewlett Packard, Scottish Power and PepsiCo debt-equity cases, pulling out the practical lessons for taxpayers considering putting debt-equity structures in place.

It also examines how to defend a debt-equity position against an IRS challenge, with exclusive insight from the taxpayer and adviser team involved in guiding Scottish Power to its hard-fought Tax Court victory over the IRS.

Join your peers by engaging in the debate on LinkedIn and Twitter. The ITR Twitter handle is @Intltaxreview and you can share your views using #ITRdisputes

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Contents

How to deal with debt-equity in the US

Has PepsiCo's US Tax Court win revealed "super factor" in deciding debt vs equity cases?

How Scottish Power's US Tax Court victory could hamper IRS

Hewlett-Packard's court defeat is bad news for US banks

Download this special report as a PDF

Further reading on ITRPremium's Tax Disputes section





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