IRS Significantly Narrows New Regulations Dealing with Related-Party Debt: IRS Issues Final and Temporary Regulations That Significantly Narrow the Scope of Proposed Regulations Recharacterizing Certain Related-Party Debt as Equity for U.S. Income Tax Purposes

Sullivan & Cromwell LLP - October 13, 2016
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Earlier this evening, the Internal Revenue Service (the “IRS”) and the Treasury Department issued widely anticipated final regulations (the “Final Regulations”) and temporary regulations (the “Temporary Regulations”) that treat related-party debt as equity for U.S. tax purposes in certain circumstances.  While the Final and Temporary Regulations broadly take the same approach as the debt/equity regulations that were proposed on April 4, 2016 (the “Proposed Regulations”), they have a much narrower scope.