Securities lending transactions can have uncertain tax results

Article Abstract:

A securities lending transaction is one in which the owner of securities lends them to another party who is required to return identical securities upon demand or after a fixed term. Legal title of the securities is usually transferred to the borrower who provides collateral in the form of cash or securities. The lender receives a fee for his services and receives any interest income from the collateral. Though similar to repurchase agreements, securities lending may be taxed differently in cross-border transactions and may not be subject to withholding tax if the transfer is not a sale.

Securities industry, Capital market, Capital markets, Loans, Repurchase agreements

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Recent service rulings limit affirmative use of deemed dividend rules

Article Abstract:

The IRS has issued Revenue Rulings 92-86 and 92-85 restricting the deemed dividend practices of multinational corporations under IRC section 304. This practice involves stock redemptions through subsidiaries in such a way that US withholding tax can be diminished, and it also allows profits and earnings to be shifted tax-free.

Laws, regulations and rules, Dividends, International business enterprises, Multinational corporations

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