sheltered. The debt between Target and Holding will often be pursuant to a promissory note of Target that is given to Holding either in exchange for property or cash or, more commonly, as a distribution (dividend or otherwise). For this strategy to work, the debt must Womens Nike Shoes Air Max 90 be respected for tax purposes. To defeat the tax agency's argument that the structure is merely a tax gimmick without substance and that the debt owed by Target to Holding should be disregarded, Target and Holding must be able to demonstrate that the debt had the form of a debt instrument, that the parties intended that it be a debt instrument, and that economically the instrument was a debt. To satisfy the first requirement, Nike Womens Air Max 90 Ultra
the instrument should be in writing, be designated as a debt instrument, have fixed payment dates, contain a promise to pay a sum certain at a fixed date in the future, provide for adequate, noncontingent interest, and be enforceable by the creditor.
Furthermore, in determining whether the parties intend that the instrument evidence a debt that has legal and economic significance, the parties' subjective intent will be ascertained from objective factors, such as whether payments due under the instrument are in fact made and the parties' treatment of the instrument for legal and financial accounting purposes. Finally, for the debt instrument to satisfy the principles of economic reality, the debt should be of the type that a third party investor would have made under the same or similar terms. The principles of section 482 of the Internal Revenue Code should be relevant; if a debt instrument contains arm's length terms, it should be deemed to be a debt under principles of economic reality. In a Texas Comptroller's Decision, an Administrative Law Judge determined that the taxpayer was not allowed to exclude pushed down debt in calculating its surplus. The parent corporation pushed down debt associated with the taxpayer, prior to spinning off the taxpayer, in exchange for the taxpayer's note.
debt will create an actual liability on the part of Target rather than merely be an accounting entry. Under this strategy, if Target pays interest expenses to Holding that matches or almost matches the interest expense paid by Holding to third parties, the operating income of Target should be effectively Nike Air Max Women Black Tumblr
trigger its issuance of the note. Comptroller's Decision No. 33,517, 1995 Tex. Tax LEXIS 468 (July 10, 1995). This decision seemingly flowed from the failure to prove the validity of the note and the underlying debt, thus leaving open the possibility that a valid debt instrument.
The ALJ determined thatand time of payment, there is no evidence that theof [the taxpayer] for the report periods inMore specifically, the ALJ stated that the taxpayer had not offered any evidence of why the note was pushed down after being carried on the parent's book for four years, no payment had been made and no interest had been paid or accrued on the debt through the audit period, and no evidence had been adduced demonstrating what the taxpayer had received to Womens Nike Air Max Running Shoes
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