IRS Issues Important Guidance on Foreign Lending Activities

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The IRS has released a memorandum describing a hypothetical situation in which a foreign hedge fund uses a U.S. corporation to be its agent for originating loans in the U.S. The IRS concludes that the foreign corporation is itself engaged in a foreign lending business, even though it has no direct presence or activities in the U.S., because of the agent's activities. The fact pattern described is not atypical for foreign hedge funds and other lenders. This may be indicative of a more aggressive enforcement stance by the IRS with regards to foreign lenders.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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