11 February 2013
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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
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
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.
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