The recently finalized business interest deduction regulations unexpectedly reserved on a favorable rule for U.S. shareholders of controlled foreign corporations, presenting a quandary for taxpayers looking to apply the rules.
In the final regs (T.D. 9943) issued January 5, Treasury and the IRS clarified how to apply the section 163(j) rules for limiting business interest deductions to CFCs, but they left in proposed form several rules, including a critical one affecting U.S. shareholders. That decision shocked practitioners and complicates taxpayers’ calculus for determining which rules to apply retroactively, in the current year, and prospectively.
With Treasury and the IRS’s apparent rush to get guidance out and their decision to reserve on several areas, the law is still unclear, says A&M Taxand's Kevin M. Jacobs.
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