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Tax Bar Has Serious and Substantial Comments to the Proposed IRC Section 385 Regulations

On April 4, 2016, the Internal Revenue Service and the US Department of the Treasury issued proposed regulations pursuant to Internal Revenue Code (IRC) section 385 addressing whether an interest in a related corporation is treated as stock or indebtedness for US federal income tax purposes (Proposed Regulations). On June 29, 2016, both the DC Bar Taxation Section and the New York State Bar Association Tax Section submitted comments on the Proposed Regulations. Both Tax Sections urged Treasury not to finalize the Proposed Regulations. The DC Bar Taxation Section letter can be found here and the New York State Bar Association Tax Section letter can be found here.

The Proposed Regulations have been met with substantial criticism by the tax bar and taxpayers alike. The Proposed Regulations would have a significant impact on intercompany debt of multinational groups and could, if finalized in their proposed form, force major changes in the way that taxpayers conduct routine business.

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About this Author

K. Christy Vouri, tax, international, world, attorney, McDermott Will, law firm
Associate

K. Christy Vouri is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on U.S. and international taxation. Prior to joining McDermott, Christy served as a law clerk to Judge Robert A. Wherry, Jr. in the United States Tax Court.  She is an adjunct professor of tax practice and procedure litigation at the Georgetown University Law Center.

202-756-8817
Timothy S Shuman, Corporate Tax Attorney, McDermott Law Firm
Partner

Timothy S. Shuman is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  Tim focuses his practice on corporate and international tax matters for U.S. and foreign multinationals, with particular emphasis on acquisitions, dispositions, restructurings and liquidations.  He has extensive experience in structuring and providing advice on tax-free reorganizations and spin-offs involving both privately held and publicly traded companies and regularly represents clients in obtaining private letter rulings and other guidance from the IRS.  His work has included a number of corporations with special tax status, such as regulated investment companies.

Tim also has experience with international tax issues including supply chain planning and principal structures, foreign tax credit planning, tax-efficient repatriation strategies, tax basis planning and cross-border mergers and acquisitions.

Tim also has represented a number of clients before the IRS in connection with audits and the IRS Appeals process, including with respect to worthless stock losses and foreign tax credit issues. 

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