US debt-equity special focus

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

US debt-equity special focus

us-debt-equity-puff.gif

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

Tweet this         #ITRdisputes         LinkedIn group

Contents

us-debt-equity1-court.jpg

How to deal with debt-equity in the US

us-debt-equity2-pepsi.jpg

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

us-debt-equity3-scottishpower.jpg

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

us-debt-equity4-hp.jpg

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

more across site & shared bottom lb ros

More from across our site

Elsewhere, the UAE’s tax office has issued an update on registration penalties and two firms have been busy making lateral hires
The case sits within a context of Brazil signalling that it is replacing informal discretion and ambiguity with structures that reward analytical rigour, one expert tells ITR
Jeff Soar lifts the lid on WTS UK’s ambitious recruitment plans, the firm's positioning against the big four, and why tax is the perfect profession for AI
The move reinforces Milan’s role as a key European hub for international business, the firm said
Australia’s government has also announced that it will implement the pillar two side-by-side agreement
Sara Morgan is due to join Joseph Hage Aaronson & Bremen as a partner in London, ITR understands
The newly combined tax team has already worked on thousands of joint client matters, leaders from McDermott Will & Schulte tell ITR
As AI becomes increasingly intuitive and idiot-proof, its tax applicability is becoming impossible to overstate
New data on public CbCR showed uneven adoption, as Singapore advanced pillar two compliance and firms expanded their tax capabilities
Nearly two years after its publication, the Corporate Tax Roadmap is reshaping the UK’s TP framework through incremental reforms focused on scope, transparency and earlier HMRC intervention
Gift this article