IRS: Loan Origination by Foreign Entity Through U.S. Intermediary Subject to U.S. Tax

more+
less-

On September 22, 2009, the Office of Chief Counsel of the Internal Revenue Service (“IRS”) released a generic legal advice memorandum (“Memorandum”), concluding that interest income earned by a foreign corporation with respect to loans originated by an agent in the U.S., whether dependent or independent, is subject to net income tax in the U.S. as income “effectively connected” with the conduct of a U.S. trade or business. The Memorandum is significant in that it clearly indicates that the IRS is prepared to take an aggressive stance against strategies developed by offshore funds and lenders that use intermediaries to originate loans in the U.S. without subjecting income derived from those activities to tax in the U.S. An expansive view of the Memorandum indicates that the IRS might also challenge situations in which an intermediary acquires or services loans pursuant to a management agreement.

Please see full update below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

more+
less-

Morrison & Foerster LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×