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Debt v. Equity: Judicial Factors Still Applicable Post-§385 Regulations

Volume 4 No 2    /    Read Article

By Galia Antebi and Kenneth Lobo

The last quarter of 2016 saw the introduction of final regulations establishing benchmarks for treating a debt instrument as true debt for U.S. income tax purposes. These regulations apply to companies over a certain size issuing debt instruments exceeding $50 million. Debt issued by owner-managed companies are not covered by the regulations and, as a result, tests established by case law will continue to apply. Galia Antebi and Kenneth Lobo look at a relatively recent case, Sensenig v. Commr., in which the standard tests were applied – the equivalent of comfort food for tax lawyers.   See more →