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US debt-equity special focus
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.
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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.
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Further reading on ITRPremium's Tax Disputes section
- UK taxpayers say US IRS is way behind HMRC in handling debt-equity cases
- US Court of Appeals ruling sheds light on debt vs equity
- Former IRS chief counsel tells taxpayers what to expect in tax litigation
- Amazon's US transfer pricing challenge could end IRS's aggressive intangibles approach
- Eaton's US Tax Court case could define obligations of parties to an APA
- US Court of Appeals Aloe Vera case raises information exchange fears
- Disputes in 2012: where the tax authorities succeeded
- US Supreme Court to address creditability of UK windfall tax
- What Union Carbide tells us about qualifying supplies in R&D
- What the UBS whistleblower payout means for corporate taxpayers
- US Federal Circuit decision in Dominion Resources invalidates IRS regulations
- How US multinationals can prepare their French subsidiaries for tax raids
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