Application of new intercompany transaction regulations to selected transactions

Article Abstract:

The IRS's revised consolidated return regulations, issued in 1995 to cover tax treatment of intercompany transactions between affiliated group corporations, contain changes creating problems in predicting tax results. The revised regulations treat transferor and transferee members as separate entities in determining amount and location of gain or loss, but as a single entity's divisions concerning the relevant timing and key attributes. The regulations' uniform application principles prevent accurate prediction of tax outcomes of group transactions such as member debt or stock transactions, Section 1031 or 1033 transactions, and loss property transfers.

Taxation, Affiliated corporations, Consolidated tax returns

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Downstream mergers and inversion transactions

Article Abstract:

Tax-free transactions involving downstream mergers and inversion transactions that appear to circumvent the purpose of the 1986 General Utilities doctrine repeal may be taxable under IRS Rev. Proc. 94-76 and Notice 94-93, issued in late 1994. The General Utilities repeal was based, in part, on Congress's view that the doctrine's stepped-up basis treatment worked against corporate income taxation. The IRS should issue rules covering ways to make the treatment of downstream mergers and inversion transactions conform to the repeal's purposes.

Acquisitions and mergers, Corporate reorganizations, General Utilities doctrine (Taxation)

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Corporate tax shelters, financial engineering and the Colgate case

Article Abstract:

The economic substance doctrine should not have been applied by the Tax Court to the corporate financial transactions in ACM Partnership where Colgate-Palmolive Co.'s loss deductions were denied. The court applied the economic substance doctrine when finding the installment sales transactions underlying the claimed deductions served no useful nontax purpose. Since such could be said for most financial transactions, the case by case application of the doctrine precludes predictability and uniformity.

Tax Law, Public Finance Activities, Cases, Tax shelters, Loss deductions

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