Monday, as part of the Obama administration's announcement
of a crackdown on inversions and the release of temporary
regulations aimed at tightening the inversion rules (a separate
Osler Update on which will be forthcoming), the U.S. Treasury
issued proposed regulations that would dramatically change the
taxation of corporate debt issued to related corporations having
nothing to do with inversions or foreign acquisitions. Most
significantly, the regulations impose new rules under which certain
purported related-party debt instruments are deemed to be equity
for U.S. federal tax purposes. These new rules have evoked a
groundswell of both praise and criticism.
In addition, the regulations (i) authorize the IRS to treat
certain related-party interests in a corporation as indebtedness in
part and stock in part for U.S. federal tax purposes, and (ii)
establish documentation requirements that must be satisfied in
order for certain related-party interests in a corporation
