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

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.