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Treasury May Revamp Section 385 Documentation Rules

Future of the distribution rules is linked to the outcome of tax reform.

The U.S. Treasury Department said last month that it was considering streamlining the documentation requirements of Section 385, an IRS rule aimed at discouraging earnings stripping. At the same time, it said that the distribution portion of the regulations, relating to whether corporate transactions are considered debt or equity, might be eliminated, depending on the success of current congressional efforts to reform the U.S. tax code.

“Treasury has come out publicly and said they’re looking at withdrawing the documentation rules in their entirety,” said Joe Calianno, a tax partner and international technical tax practice leader in the national tax office of BDO USA.

“They received a lot of comments from taxpayers and practitioners about the undue burdens those documentation rules would create,” Calianno added. “I think they’re looking at revamping them to make them less burdensome on taxpayers.”

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Susan Kelly

Susan Kelly

Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.

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