IRS Issues Exceptions to Rules Aimed at Corporate Inversions (2)

The IRS issued final rules providing limited exceptions to regulations aimed at preventing corporations from lowering their U.S. tax bills by borrowing from related foreign companies.

The rules (T.D.9897) provide exceptions for some types of related-party debt, including certain short-term and working capital debt, from IRS rules under tax code Section 385 that allow the agency to re-characterize tax-deductible loans as taxable stock. The Section 385 rules are part of a broader Obama-era regulatory effort to crack down on corporate inversions, where U.S. companies move their headquarters overseas.

The final regulations, released Wednesday, clarify how ...