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Pumping up or Sliming down are Inversion Tricks of the Past

Recent changes to rules regarding corporate inversions from the US Treasury Department and IRS make it harder for corporations to disguise it's true size. Jeffrey S. Freeman, J.D., LL.M Old tricks aren't hard to see through - throwing in a few extra pushups right before you pick up your date to inflate the appearance of your biceps is harmless. Same goes for putting your body through a crash diet to drop those last five pounds before your big event. Both aim to disguise your true size and the US Treasury department is saying that corporations can no longer use these tricks. Pumping Up with Passive Assets In order to meet the required new foreign parent's size to meet the required 80% rule corporations would inflate the new parent's size through "cash boxes". "Cash boxes" are passive assets such as cash or marketable securities that are not actually used to support daily business functions. New rules state that stock of the foreign parent that is attributable to passive assets would be disregarded as the company size is evaluated for the 80% requirement. This rule would apply is at least 50% of the corporation's assets are passive, since they are using their [...]

By | 2017-01-01T11:26:59+00:00 October 15th, 2014|Freeman Tax Law|Comments Off on Pumping up or Sliming down are Inversion Tricks of the Past

The US Treasury: Downers for Inversions and Spinversions

The US Treasury department will no longer allow corporations to play hopscotch, time to leave it on the playground. Jeffrey S. Freeman, J.D., LL.M The recent announcement from the US Treasury Department and IRS are leaving corporations with some tricky decisions. Those contemplating acquisitions must now play by the new rules that went into effect immediately, except for deals being performed on the day of the announcement, September 22, 2014. New Corporate Playground Rules Strategic moves that were once legal are now being outlawed and some are complete game changers. No Hopscotch Allowed: Hopscotch was a term used to refer to corporations using a loan to avoid paying taxes. Inverted companies would avoid paying taxes on dividends by loaning to a foreign parent instead of the actual U.S. parent that was the intended recipient of the funds. Now such a loan would be taxable, thus making them unattractive and hence gone. This has major impact on eight U.S. companies with pending inversions. After Medtronic's purchase of Covidien (one of the largest deals in U.S. history) it is loaning untaxed profits outside the U.S. to its new Irish parent company. Under the new rules this transaction would be taxable. Spinning doesn't [...]

By | 2017-01-01T11:26:59+00:00 October 14th, 2014|Freeman Tax Law|Comments Off on The US Treasury: Downers for Inversions and Spinversions