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

David S. Miller

Proskauer; Proskauer Rose LLP

Tax Notes, October 2, 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."

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Date posted: September 27, 2000  

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: https://ssrn.com/abstract=243765

Contact Information

David S. Miller (Contact Author)
Proskauer ( email )
Eleven Times Square
New York, NY 10036-8299
United States
Proskauer Rose LLP ( email )
11 Times Square
New York, NY 1036
United States
(212) 969-3006 (Phone)
(212) 969-3006 (Fax)
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