Financing International Operations

Code Sec 267(a)(3)(B) generally provides that a taxpayer accruing a deductible amount owed to a related foreign person is not entitled to a deduction in a year before the amount is paid. In 2013, the IRS released Chief Counsel Advice 201334037 (CCA), which analyzes when an amount should be considere...

Full description

Saved in:
Bibliographic Details
Published in:International Tax Journal 2015-03, Vol.41 (2), p.5
Main Authors: Harter, L G "Chip", Shapiro, David H, Bouzis, Elizabeth
Format: Article
Language:English
Subjects:
Cash management
Controlled foreign corporations
Foreign source income
Foreign tax credits
Internal Revenue Code
International taxation
Payments
Profits
Related party transactions
Tax deductions
Tax regulations
Taxpayers
Treasury operations
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Code Sec 267(a)(3)(B) generally provides that a taxpayer accruing a deductible amount owed to a related foreign person is not entitled to a deduction in a year before the amount is paid. In 2013, the IRS released Chief Counsel Advice 201334037 (CCA), which analyzes when an amount should be considered paid for these purposes. The CCA asserts a very high standard for establishing that payment is made, in that it disregards, under a circular cash-flow analysis, actual payments if the payments are directly or indirectly funded by the related payee. The authors of this article believe that the payment standard set out in the CCA is not the correct standard for purposes of Code Sec. 267(a)(3)(B). They discuss the potential impact of the CCA's analysis on two important international treasury practices -- international cash pooling and international payment netting -- and explore how taxpayers might wish to modify their practices in response to the uncertainty created by the CCA.