Section 7874 was enacted to foreclose many tax benefits from the transfer of a U.S. corporate business to a foreign corporation or the insertion of a foreign holding company as owner of U.S. corporations. The rules also apply to similar partnership transfers. Two different sets of rules apply, depending on the percentage ownership in the foreign entity that is acquired by former owners of the U.S. entity. The IRS has now issued additional regulations regarding the application of these rules, which regulations apply to acquisitions completed after June 9, 2009.
The following is a summary of the items covered in the new regulations:
1. The use of two or more entities to acquire the U.S. entity as a method of avoiding the anti-inversion rules is prohibited;
2. Guidance on how the rules apply when the foreign corporation is acquiring more than one U.S. entity is provided;
3. Publicly-traded foreign partnerships may be treated as a foreign corporation under the rules, even if public trading does not being in the two-year period after the acquisition;
4. Treating interests in entities as equity interests under the rules if they are economically equivalent to equity…
You get the idea.