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

/GROCO
Posted in

First Half of Current Fiscal Year a Record-Breaker for U.S. Treasury

It’s been another record year for the federal government so far, which is in the midst of its current fiscal year. At the end of March, when the government reached its halfway point of the 2016 fiscal year, it had already collected $1.48 trillion. One might think that this massive haul would help ease the…

Why Is Almost Half the Country Paying no Federal Income Tax?

One of the biggest tax debates that will likely always exist is whether or not the nation’s wealthy are paying enough in taxes? It’s easy for some to argue that they don’t but there are many factors that must be considered. Plus, all the while, nearly half of the country’s would-be taxpayers don’t actually pay…

Where Is Your Paycheck Going?

While many of the nation’s high net-worth individuals make much of their income through capital gains, those who still collect a paycheck are doling out of cash to the IRS every time they get paid. The same is true for all taxpayers no matter what income level they fall in. In fact, according to a…

Should the IRS File Your Taxes for You?

Imagine a world where you didn’t have to file your own taxes. Of course, you can use an experienced and professional tax and accounting firm like GROCO to do your taxes for you, but what if you didn’t even have to send your tax return information to an accountant? Could that ever really happen? In…