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Corporate Inversions

Corporate Inversions - CorporateInversions The principal...

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Corporate Inversions The principal tax benefit of an inversion transaction is that a foreign controlled corporate group c opportunities by sheltering U.S. profits of the U.S. corporate group with deductible payments ma parties. Moreover, tax benefits are enhanced to the extent that foreign subsidiaries held by the U.S the U.S. subpart F rules) are restructured or their operations are otherwise transferred to related fo outside the scope of the U.S. subpart F regime because the new foreign parent’s widely held stock of a controlled foreign corporation. Many inversions were subject to full taxation at the shareholder level (and sometimes at the corpo absence of gain or availability of losses or other income-sheltering tax attributes, however, often m consummated transactions. Notwithstanding the “toll charge” on inversions under prior law, Cong inversion transactions should be further deterred because of the significant opportunities to strip e States. Congress also believed that similar benefits could be achieved from inversion transactions conducted in partnership form. . . . [S]ection 7874 operates to effectively disregard the inversion (i.e., in the case where former sh percent of the acquiring foreign corporation) or limit the benefits of an inversion (i.e., in the case own less than 80 percent but at least 60 percent of the acquiring foreign corporation). Excerpt from General Explanation of Tax Legislation Enacted in the 108 th Congress (JCS- 5-05, May 2005): U.S. tax treatment of inversion transactions A U.S. corporation may reincorporate in a foreign jurisdiction and thereby replac a multinational corporate group with a foreign parent corporation. as inversion transactions. Inversion transactions may take many different forms, i asset inversions, and various combinations of and variations on the two. have been stock inversions. In one example of a stock inversion, a U.S. corporati which in turn forms a domestic merger subsidiary. The domestic merger subsidia
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corporation, with the U.S. corporation surviving, now as a subsidiary of the new corporation's shareholders receive shares of the foreign corporation and are treate U.S. corporation shares for the foreign corporation shares. An asset inversion rea through a direct merger of the top-tier U.S. corporation into a new foreign corpor forms. An inversion transaction may be accompanied or followed by further restr group. For example, in the case of a stock inversion, in order to remove income f the U.S. taxing jurisdiction, the U.S. corporation may transfer some or all of its fo
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