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Law360 Quotes Elizabeth Stevens: Lack of Noncash Exceptions in BEAT Rules Has Wide Scope

December 18, 2018, Law360

Proposed base erosion and anti-abuse tax regulations provide U.S. multinationals with much-needed answers to calculation questions, but the inclusion of noncash transactions without any exceptions — including when there aren’t recognized gains or losses — could take companies by surprise.

. . .

In the absence of any regulations, a U.S. company might try to get around this category by arguing that no base erosion occurred because it didn’t pay cash to acquire the assets from a foreign affiliate, according to Elizabeth Stevens of Caplin & Drysdale.

“But there has been value that’s been transferred to the foreign person in exchange for the asset,” she said.

If the foreign party had a basis greater than zero, then usually in a nonrecognition transaction, the U.S. acquirer would take a transferred basis and depreciate it, Stevens noted.

She predicted the first category of base erosion payments under the statute, which covers “a payment with respect to which a deduction is allowable,” will have the biggest impact for companies.

. . .

As Stevens saw it, the statute itself was an invitation for companies to drill down into their cost accounting, and the regulations reiterated that.

“There are a lot of existing rules in case law, in statutes [and] in regulations,” she said. “They have become more relevant because of the BEAT, but they are what they are.”

For the full article, please visit Law360’s website (subscription required).

Excerpt taken from the article “Lack of Noncash Exceptions in BEAT Rules Has Wide Scope” by Natalie Olivo for Law360.


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