The Tax Court Ignores Sham and Section 367 Arguments but Utilities 482 to Allocate Income - Hospital Corp. of America v. Comr
Article Abstract:
In this case, decided in September of 1983, three meaningful aspects of the Tax Court's position were evidenced. It would not ignore a tax haven corporation under the Commissioner's sham corporation notion. Reallocation provisions were employed to attribute three quarters of the net income of tax haven subsidiaries to the domestic parent. Additionally, the Commissioner did not pursue the foreign subsidiary in light of its activities' connection with trade and business affected by United States income tax as specified in Section 882. The facts of the case, including a hospital management contract for Saudi Arabia, are analyzed. The Hospital Corporation of America formed two foreign subsidiaries in Cayman Islands to handle the management of King Faisal Specialist Hospital. The corporation's formation of foreign subsidiaries amounted to a huge tax savings, and the Commissioner argued that their establishment was a sham. The Court was generally unwilling to fix the point wherein a fractionally negotiated contract becomes a property interest.
Publication Name: Tax Management International Journal
Subject: Law
ISSN: 0090-4600
Year: 1983
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IRS Attack on Domestic Branching
Article Abstract:
In May of 1983, the Internal Revenue Service (IRS) started a direct attack on the tax benefits accruing from domestic branching. This attack was styled as an adverse ruling, but the propriety of this is in question. Parent branching of various domestic and foreign sales operations through first tier liquidation is analyzed. In this case the branching included outbound liquidation. Such outbound liquidations are normally accorded positive clearance if conditions involving assets transferred abroad are satisfied. The case of outbound liquidations, and the purpose of their design is analyzed in detail. Section 367 of the Internal Revenue Code may not be an adequate basis for questioning the nature of assets.
Publication Name: Tax Management International Journal
Subject: Law
ISSN: 0090-4600
Year: 1983
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Trends: United Kingdom
Article Abstract:
The Inland Revenue of the United Kingdom has printed its legal reading of a resident firm for United Kingdom tax reasons. Changes were effected in the reading of 'place of effective management' and states in which a firm is managed in light of double taxation treaties. An alternate place of control reading has been developed. The business expenses of apparrel worn by a female lawyer was disallowed. The United Kingdom Double Taxation Treaty with Indonesia will cease operation as of April 1984 with regard to corporation tax.
Publication Name: Tax Management International Journal
Subject: Law
ISSN: 0090-4600
Year: 1983
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