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§385 Regulations Adopted with Helpful Changes, but Significant Impact Remains

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§385 Regulations Adopted with Helpful Changes, but Significant Impact Remains

On October 13, 2016, the Treasury Department released final and temporary regulations under Code §385 relating to the tax classification of debt.  The new rules were proposed initially in April and were followed by a torrent of comments from Congress, business organizations, and professional groups.  In the final portion of his trilogy on debt-equity regulations, Philip R. Hirschfeld explains the helpful provisions that appear in the final regulations and cautions that not all controversial proposals were modified.

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Uproar Over Proposed §385 Regulations: Will Treasury Delay Adoption?

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Earlier this year, the U.S. Treasury Department issued comprehensive and detailed proposed regulations under Code §385 that address whether a debt instrument will be treated as true debt for U.S. income tax purposes or re-characterized, in whole or in part, as equity.  Not surprisingly, significant pushback has been encountered from members of Congress, professional bodies, and affected taxpayers.  It seems that the one-size-fits-all approach contains many defects.  Philip R. Hirschfeld and Stanley C. Ruchelman explain.

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Insights Vol. 3 No. 5: Updates & Other Tidbits

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In this month’s update, Elizabeth V. Zanet and Nina Krauthamer report on (i) attacks on cash pooling arrangements as part of earnings-stripping rules under Code §385, (ii) the latest regulations aimed at increasing financial transparency, including adoption of a customer due diligence (“C.D.D.”) final rule, (iii) proposed beneficial ownership legislation, and (iv) new reporting rules for foreign-owned, single member L.L.C.’s that engage in business with the foreign owner; as well as a new wave hiring by the I.R.S. of enforcement officers.

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Related-Party Debt: Proposed Code §385 Regulations Raise Major New Hurdles

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In a follow-up piece on newly proposed anti-inversion regulations, Phillip R. Hirschfeld offers a detailed analysis of new debt equity regulations.  Mind-boggling complexity is proposed for rules in an area of the tax law that lay dormant for almost 40 years.

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Inversions Under Siege: New Treasury Regulations Issued

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On April 4, 2016, the Treasury Department issued a third round of new rules under Code §7874 aimed at halting the wave of inversions. Already, at least one inversion transaction, involving pharmaceutical giants Pfizer and Allergan, has been scuttled. Beyond that, the new rules resuscitate regulations issued under Code §385. Philip R. Hirschfeld explains.

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