Snake in the Box: The Hazards of Implementing Substantive Tax Policy Through 'Anti-Abuse' Rules

Posted: 27 Sep 2000


Miller suggests that the proposed check-the-box regulations, which would retroactively invalidate the tax nothing status of a foreign entity that is sold within 12 months after its check-the-box election, reflects the Treasury Department's unhappiness both with current law's favorable treatment for U.S. taxpayers that sell the assets rather than the equity of their foreign businesses and with U.S. taxpayers' ability to use hybrid entities to reduce their foreign tax liability without increasing their U.S. tax burden. Miller argues that the proper tax treatment of foreign business sales and the broader question of U.S./foreign tax symmetry each present fundamental tax policy issues that should be resolved by Congress, and not solely by Treasury and the IRS. Miller urges Congress to rationalize the treatment of foreign sales of assets and equity interests, and recommends that any changes be made to the substantive rules, and not the "procedural" check-the-box regulations. If the proposed regulations are finalized in their current form, Miller cautions, they will trap unwary taxpayers, give rise to wholly unanticipated results, be completely avoidable, and ultimately permit untold abuse. In short, they will hatch a "snake in the box."

Suggested Citation

Miller, David S., Snake in the Box: The Hazards of Implementing Substantive Tax Policy Through 'Anti-Abuse' Rules. Tax Notes, October 2, 2000. Available at SSRN:

David S. Miller (Contact Author)

Proskauer Rose LLP ( email )

Eleven Times Square
New York, NY 10036-8299
United States

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