Too Bad To Be True – Code §§267A and 894(c) Signal the End for Cross Border Hybrids

Volume 10 No 5    /    Read Article

By Neha Rastogi and Stanley C. Ruchelman

If you are a tax professional, you know your client is in a pickle if a provision under U.S. tax law disallows a deduction for the payor of an expense and another provision subjects the corresponding income of a foreign counterparty to U.S. tax, notwithstanding its residence in a treaty partner jurisdiction. That is the predicament that is faced when Code §§267A and 894(c) apply to outbound payments of deductible items to hybrid entities. In their article, Stanley C. Ruchelman and Neha Rastogi explain the death knell of what had been a common planning technique for U.S. tax advisers. They point out that, in certain circumstances involving payments to a reverse hybrid entity, relief might be provided by resort to competent authority proceedings.  See more →