Oct 22, 2018
Linda Swartz comments on the ways in which the loss limitation rules apply to business interest deduction carryforwards could wreak havoc on loss corporations following an ownership change.
An excerpt from Tax Analysts Tax Notes Today, October 22, 2018:
Because the Tax Cuts and Jobs Act (P.L. 115-97 (2017-101242)) applies the section 163(j) business interest deduction limit more broadly than under prior law, companies with highly leveraged transactions - not just financially troubled companies - need to take a close look at how section 382 applies to the disallowed business interest, Linda Z. Swartz of Cadwalader, Wickersham & Taft LLP said October 18 at a Practising Law Institute conference in New York.
Sections 163(j) and 382 "don't work seamlessly together, and there are a number of unanswered questions" driving the need for guidance, Swartz said.
One issue is whether a corporation that only has disallowed business interest in the current year - no loss or other carryforwards - is considered a loss corporation subject to section 382 limitations, wartz said. If so, the number of loss corporations will increase exponentially, she said, adding, "That will be a sea change."
Although it's clear that a carryover of disallowed interest to a change year is a pre-change loss, there's confusion over whether "a carryover created by the losses in the year of change is also a pre-change loss," Swartz said.
For a carryover that arises in a year of ownership change, the IRS may consider similar rules for other carryforwards - that is, allocate the disallowed business interest between pre-ownership change and post-ownership change periods - and limit the pre-ownership change portion, Swartz said.
The question remains whether those allocation rules should be applied in determining taxable income in an ownership change year, or whether any disallowed interest allocable to the pre-change period is treated as a pre-change loss, Swartz said.
The Bank of England has initiated a review of its own exposure to LIBOR,
Scott Cammarn, Jonathan Watkins, Mark Chorazak, Aaron Lang
On 7 June 2019, Regulation (EU) 2019/876 (CRR II) was published in the Official Journal of the EU.