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IRS Rules Offshore Loan Activities Subject to U.S. Tax |
October 22, 2009
Previously published on September 2009
In a legal memorandum issued by the Office of the Chief Counsel, the Internal Revenue Service ("IRS") has concluded that a foreign corporation's income attributable to certain loan activities was effectively connected with the conduct of an active trade or business within the United States and, therefore, was subject to U.S. income tax. However, the activities of the foreign corporation in the memorandum were significantly different than typical offshore fund investment activities and the adverse conclusion under the facts in the memorandum is not particularly surprising. The troublesome analysis and conclusion in the memorandum should not be applicable in most cases, and certain portions of the analysis may in fact be supportive of favorable tax treatment for typical offshore investment funds.
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The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance. |
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