Recent Tax Court Memorandum Decision of Interest Re Cross-Border, Related-Party Debt Structures

Summary: Use of related-party Debt when a non-US corporation buys a US business is an important tool in international tax planning. The debt vs. equity issue is of importance both in respect of (i) the extent to which a non-US parent may be subject to US tax, and (ii) whether the US subsidiary may claim deductions for interest payments.