Tax-Free Spinoffs Could Be Much Tougher Under Proposed New Rules

business-tax-[Converted]

 

Many U.S. companies take advantage of lower foreign taxes by creating tax-free spinoffs of their parent companies. It’s a great and legal way to lower their corporate tax bills. However, some lawmakers have long pressed for changes to these rules and it appears that changes could be coming.

The U.S. Treasury Department recently proposed some new rules that would make it more difficult for companies to create certain kinds for spinoffs. In order to avoid capital gains taxes on the transaction 5 percent of the amount of a spin-off must be an active trade or business.

The new proposed rules also aim to clear up the factors that determine when a spinoff cannot be used for distributing profits and earnings to shareholders. If the new rules pass, the transaction would be deemed a device if there was a large enough gap between the amount of the company that is made up of nonbusiness assets while the other company had a lot less.

At this point the new rules have only been proposed and they will not take effect unless the Treasury Department makes them official. Even at that time they still wouldn’t affect any transactions that were already planned before approval even if the transaction was finalized after.

http://www.wsj.com/articles/new-treasury-rules-would-make-it-harder-to-complete-tax-free-spinoffs-1468500481

Posted in
Cliff Dochterman

Legacy of Service | Cliff Dochterman

  About Cliff Dochterman Cliff Dochterman served as the World President of Rotary International from 1992-1993. His professional career was spent in the field of higher education administration. As a youth, being motivated by his brother, Cliff became part of the Boy Scouts of America where he obtained the rank of Eagle scout. He has…

Richard Del Monte

Where does Happiness Come From? | Richard Del Monte

  About Richard Del Monte Richard is a CERTIFIED FINANCIAL PLANNER™, Certified Wealth Consultant, and nationally recognized expert on Families and Wealth. Richard has been featured on FOX Business News, The Wall Street Journal, New York Times, Private Opportunities Club, Private Wealth Magazine, Trust & Estates, and Family Wealth Report. A sought after speaker, he…

Mckay Thomas

The Future of Health Care | McKay Thomas

  About McKay Thomas Since he was in high school, McKay Thomas has been an entrepreneur. Some of his companies have been, pooltables.com, baby.com and ainda.com Currently he is the co-founder and CEO of First Opinion, a company which matches a personal doctor to to their clients that they can contact 24 hours a day.…

Ben Parr

Attention Triggers | Ben Parr

  About Ben Parr Ben Parr is an award-winning journalist, author, entrepreneur, investor and expert on attention. Through his unique experience as a leading technology writer, venture capitalist and prolific public speaker, Parr has coached dozens of young startups and Fortune 500 corporations on how to get attention for their products. He was named one…