In October 2016, the IRS issued temporary and final regulations under Sec. 385 providing rules for the characterization of related-party debt instruments.1 The temporary and final regulations took into consideration comments by many companies and business and professional organizations, including the AICPA, on proposed regulations issued in April 2016.2 The preamble to the final and temporary regulations indicates that they were motivated by corporate inversions and earnings stripping accomplished through intercompany debt in a cross-border context. Although the regulations' examples include only foreign entities, the regulations apply to both domestic and foreign related-party indebtedness.
Although the regulations were finalized in October, their fate under the Donald Trump administration remains unknown as of the time of this writing. The regulations have been controversial, and it is possible that they will be withdrawn, or Congress could use the Congressional Review Act3 to remove them. House Ways and Means Committee Chair Kevin Brady, R-Tex., has been particularly outspoken in his opposition to the regulations.4 Unlike withdrawal of proposed regulations, withdrawal of the final regulations would require the same sort of notice and comment period that regulations go through when they are issued.5
Editor's note: These regulations were identified as burdensome by the Treasury Department in July 2017 and are being reviewed for possible modification or withdrawal. See "Treasury Identifies 8 Regulations as Burdensome."
Sec. 385 was enacted in 1969 (see the timeline in the exhibit below), with regulations issued in 1980 but withdrawn in 1983. With no regulations in effect for most of its history, case law has controlled the characterization of an interest in a corporation as debt or equity. For unrelated parties, case law will apparently continue to determine the characterization of an interest as stock or debt.
The final and temporary regulations substantially revised the proposed regulations, reducing their scope. As proposed, the regulations would:
- Allow the IRS to bifurcate debt instruments into part debt and part equity;
- Require extensive documentation to support related-party debt classification; and
- Provide rules to characterize certain related-party debt as equity.
The final and temporary regulations:
- Simplified the attribution rules in the definition of "expanded group" (EG);
- Excluded regulated investment companies (RICs), real estate investment trusts (REITs), and S corporations;
- Removed the bifurcation rules;
- Pushed the documentation effective date to Jan. 1, 2018;
- Provided exemptions to the funding and per se rules;
- Expanded the current-year earnings and profits (E&P) exception; and
- Limited the application of the regulations to instruments issued by domestic corporations—covered members.
Regs. Sec. 1.385-1: General Provisions
The purpose of Regs. Sec. 1.385-1 is to define terms applicable to the Sec. 385 regulations and set operating rules for determining whether an interest in a corporation is debt, equity, or part debt and part equity.
Controlled partnership: A partnership where at least 80% of the interests in the partnership capital or profits are owned directly or indirectly by one or more members of an EG. Indirect ownership is determined using the Sec. 318(a) constructive ownership rules, as modified in Regs. Sec. 1.385-1(c)(4)(iii).6
Covered member: A member of an EG that is a domestic corporation.
Disregarded entities: A business entity such as a limited liability company that is disregarded as separate from its owner, as described in Regs. Secs. 301.7701-1 through 301.7701-3.7
EG: The definition of an EG is based on the Sec. 1504(a) definition of an affiliated group, modified to include more entities controlled through stock ownership. An affiliated group occurs when:
- One or more chains of includible corporations are connected through a common parent corporation (also an includible corporation);8
- The common parent's stock ownership must directly possess 80% of the total voting power of at least one includible corporation and have a value equal to at least 80% of the total stock value of the corporation; and
- Stock meeting the two 80% tests above in each of the includible corporations (except the common parent) is owned directly by one or more of the other includible corporations.
The EG definition modifies the affiliated group definition by specifying that the stock ownership may be indirect as well as direct, that stock ownership meets the requirement if it meets either of the two 80% tests, and by including corporations that the affiliated group definition excludes:9
- Foreign and tax-exempt corporations;
- Taxable insurance companies; and
- Corporations with a Sec. 936 (Puerto Rico and possession tax credit) election for the tax year.
S corporations, RICs, and REITs that are not controlled by corporate members of an EG are excluded from all aspects of the final and temporary regulations.
The final regulations reserve on all aspects of their application to foreign issuers; as a result, the final regulations do not apply to foreign issuers.
The regulations also do not apply to transactions between regulated financial companies and regulated insurance companies because they are subject to other requirements and regulations that mitigate the risk that they would engage in transactions that these regulations are intended to deter.
Indirect stock ownership for EG purposes is determined under the Sec. 304(c)(3) constructive ownership rules.
Deemed exchange: When debt is restated as equity under the Sec. 385 regulations, the debt is deemed to be exchanged for stock. The exchanged stock has a realized value equal to the holder's adjusted basis in the debt or portion thereof. The issuer of the debt is deemed to retire the debt for its adjusted issue price. All of this takes effect on the date the debt is restated as stock. No gain or loss should be realized from the deemed exchange other than a possible foreign exchange gain or loss under Sec. 988. Accrued but unpaid interest is not included as part of the deemed exchange.10
The effective date of Regs. Sec. 1.385-1 is tax years ending on or after Jan. 19, 2017.11
Regs. Sec. 1.385-2: Treatment of Certain Interests Between Members
The purpose of Regs. Sec. 1.385-2 is to describe the minimum documentation and other information requirements for EG interests (EGIs). If the minimum documentation and information requirements are not met, the EGI is treated as stock. However, the rules of this section apply only to large, publicly traded EGs. In addition, the current rules apply only to instruments of debt.12 Large EGs have total assets over $100 million or annual total revenue over $50 million. This section of the proposed regulations contains details on the following:
- Measurement date for the assets and revenue;
- Type and age of financial statement for tested assets and revenue;
- Exchange rate for financial statements denominated in a currency other than the U.S. dollar; and
- Financial markets considered as publicly traded.
Applicable financial statement: Includes a financial statement required to be filed with the SEC, a certified audited financial statement prepared by an independent certified public accountant, or a financial statement required to be provided to a government agency.
Applicable interest: In general, any interest that is issued or deemed issued in the legal form of a debt instrument or an intercompany payable or receivable documented as debt in an accounting system.
EGI: An applicable interest whose issuer is a member of an EG and whose holder is another member of the same EG. Both the issuer and the holder can be a disregarded entity with an owner who is a member of an EG. The holder can be a controlled partnership with respect to the same EG.
Issuer: A person (including a disregarded owner) that is obligated to satisfy any material obligations created under the terms of an EGI.
Material event: Includes coming under the jurisdiction of a court in a Title 11 bankruptcy or similar event, insolvency, material change in line of business, disposal of 50% of more of the fair market value of the entity's assets, or consolidation or merger without assuming liability for outstanding EGIs at the time of the merger.
Included assets: All of an entity's assets other than inventory, assets contributed to another entity in exchange for equity in that entity, or investment assets such as portfolio stock investments to the extent that other investment assets or cash of equivalent value is substituted.
Regarded owner: A person (that is not a disregarded entity) that is the single owner of a disregarded entity.13
The regulations have four areas of written documentation that must be prepared and maintained for an EGI to be debt for federal income tax purposes. In general, the documentation must be completed no later than the time for filing the issuer's federal income tax return (including extensions) for the tax year that includes the relevant date for such documentation or information.14 The documentation must be maintained as long as the EGI is outstanding and until the applicable statute of limitation has expired for any federal tax return with respect to which the treatment of the EGI is relevant.15
Characterization of debt as stock due to a lack of proper documentation is a rebuttable presumption with respect to a particular EGI if a taxpayer demonstrates that with respect to an expanded group of which the issuer and holder of the EGI are members such expanded group is otherwise highly compliant with the documentation rules. A taxpayer can overcome the presumption if it clearly establishes that there are sufficient common law factors to treat the EGI as indebtedness, including that the issuer intended to create indebtedness when the EGI was issued.16
Unconditional obligation to pay a sum certain: There must be an issuer-executed, written document evidencing the amount owed and a specific payment date(s) or a demand feature.17
Creditor's rights: The executed written debt document must give the holder the normal legal rights of a creditor. The regulation has three examples of creditor rights: the right to trigger default, the right to accelerate payments, and the right to sue the issuer to enforce payment. In addition, the creditor rights must include superior rights to assets over shareholders'.18
Reasonable expectation of ability to repay EGI: The debt must be supported by a documented due-diligence process showing the issuer's ability to repay. Here, too, the regulation has examples of ability-to-repay documentation: cash flow projections; financial statements; business forecasts; asset appraisals; financial ratios as compared with industry averages, specifically, debt to equity; and other source-of-funds–type information. This portion of the regulations also contains special rules regarding disregarded entities and the use of third-party reports and analysis.19
Actions evidencing debtor-creditor relationship: The regulations address the documentation requirements over the life of the debt. If the issuer made payments of principal and interest on the debt, written evidence of the payments must be kept. Examples of acceptable payment evidence are wire transfer records or bank statements.20
If, instead, the terms of the EGI were not met, the holder must show written evidence of reasonable "exercise of the diligence and judgment of a creditor." Documentation examples include evidence of enforcement and renegotiation efforts, changes in the terms of the EGI, or, if applicable, details behind a decision to not enforce payment.21
Timely preparation requirement: As noted above, documentation and information must be completed by the time for filing the issuer's federal income tax return including extensions for the tax year that includes the relevant date for such documentation. The relevant date for the unconditional obligation to pay a sum certain and documentation of the creditor's rights is the date on which a member of the EG issues a new or existing EGI.22 The relevant date for a reasonable expectation of the ability to pay the EGI is also the date that the EGI is created.23
The effective date of Regs. Sec. 1.385-2 is tax years ending on or after Jan. 19, 2016.24
Regs. Sec. 1.385-3 and Temp. Regs. Sec. 1.385-3T: Certain Distributions of Debt Instruments and Similar Transactions
The purpose of Regs. Sec. 1.385-3 is to provide rules that treat certain debt instruments of a corporation as stock.
Asset reorganization: A reorganization under Sec. 368(a)(1)(A), (C), (D), (F), or (G).
Consolidated group: Has the same meaning as specified in Regs. Sec. 1.1502-1(h).
Covered debt instrument (CDI): A debt instrument issued by a covered member after April 4, 2016, that is not a qualified dealer debt instrument or an excluded statutory or regulatory debt instrument and is issued by a covered member that is not a regulated financial company or a regulated insurance company.
Debt instrument: An interest that would, but for the application of this section, be treated as a debt instrument as defined in Sec. 1275(a) and Regs. Sec. 1.1275-1(d).
Deemed holder: The EG partner that is deemed to hold a deemed transferred receivable by reason of a deemed transfer.25
Deemed partner stock: The stock deemed issued by an EG partner after reductions required by Temp. Regs. Sec. 1.385-3T(f).
Deemed transfer: A transfer described in Temp. Regs. Sec. 1.385-3T(f) between a controlled partnership and an EG partner.
Deemed transferred receivable: The portion of a debt instrument transferred between a controlled partnership and an EG partner with respect to a deemed transfer.
Distribution: Any distribution made by a corporation with respect to its stock.
Exempt distribution: A distribution of stock received without gain or loss under Sec. 354(a)(1) or 355(a)(1), not treated as other property or money under Sec. 356, or that is treated as a distribution of property under Sec. 336(a) or 337(a).
Exempt exchange: An acquisition of EG stock in which the transferor and transferee of the stock are parties to an asset reorganization and either:
- Sec. 361(a) or (b) applies to the transferor of the EG stock, and the stock is not transferred by issuance; or
- Sec. 1032 or Regs. Sec. 1.1032-2 applies to the transferor of the EG stock, and the stock is distributed by the transferee pursuant to the plan of reorganization.
EG partner: A member of the EG that is a partner (directly or indirectly through one or more partnerships) of a controlled partnership.
EG stock: Stock of a member of the same EG.
Funded member: A covered member that makes a distribution or acquisition described in Regs. Secs. 1.385-3(b)(3)(i)(A) to (C).
Holder-in-form: The person that would be the holder of the debt instrument absent the application of Temp. Regs. Sec. 1.385-3T(f)(4)—recharacterization with respect to a debt instrument issued by a controlled partnership.
Issuance percentage: The ratio of a partner's reasonably anticipated distributive share of all of the partnership's interest expense over a reasonable period, divided by all of the partnership's reasonably anticipated interest expense over that same period, expressed as a percentage.
Liquidation value percentage: The ratio of the liquidation value of the EG partner's interest in the partnership divided by the aggregate liquidation value of all the partners' interests in the partnership, expressed as a percentage.
Member of a consolidated group: A corporation described in Regs. Sec 1.1502-1(b).
Per se period: The period beginning 36 months before the date of the distribution or acquisition and ending 36 months after the date of the distribution or acquisition.
Predecessor: In general, the term "predecessor" includes, with respect to a corporation, the distributor or transferor corporation in a transaction described in Sec. 381(a) in which the corporation is the acquiring corporation, or the distributing corporation in a Sec. 355 transaction, if the corporation is a controlled corporation. There can be multiple predecessors. The term does not include a distributing corporation from the date that it ceases to be a member of the expanded group of which the controlled corporation is a member.
Property: The meaning specified in Sec. 317(a).
Retained receivable: The portion of the debt instrument that is not transferred by the holder-in-form pursuant to one or more deemed transfers with respect to a debt instrument issued by a controlled partnership.
Specified portion: With respect to a debt instrument issued by a controlled partnership and a covered member that is an expanded group partner, the portion of the debt instrument that is treated as issued on a testing date by the covered member and that, absent the required recharacterization with respect to a debt instrument issued by a controlled partnership, would be treated as stock on the testing date.
Successor: In general, with respect to a corporation, the acquiring corporation in a transaction described in Sec. 381(a) in which the corporation is the distributor or transferor corporation, a controlled corporation in a Sec. 355 distribution or exchange in which the corporation is the distributing corporation, or a seller in an acquisition of subsidiary stock in which the corporation is the acquirer. A successor does not include a controlled corporation in a Sec. 355 distribution or exchange in which the corporation is the distributing corporation, with respect to a distributing corporation, or a seller in an acquisition of subsidiary stock in which the corporation is the acquirer, with respect to an acquirer, from the date that the controlled corporation or the seller ceases to be a member of the expanded group of which the controlled corporation or acquirer, respectively, is a member. There are also certain other exceptions for acquisitions of subsidiary stock. There can be multiple successors.
The two primary operating rules are the general rule and the funding rule.
There is also a per se rule and limited exceptions to these rules.
General rule: In general, under Regs. Sec. 1.385-3, a debt instrument will be treated as stock if it is issued by a covered member to a member of the covered member's expanded group in:
- A distribution with respect to stock;
- An exchange for EG stock other than an "exempt exchange"; or
- An exchange for property in an asset reorganization, but only to the extent that, pursuant to the plan of reorganization, a shareholder in the transferor corporation that is a member of the issuer's expanded group immediately before the reorganization receives the covered debt instrument with respect to its stock in the transferor corporation.26
If a debt instrument or an EGI is deemed exchanged for stock:
- The holder is treated as having realized an amount equal to the holder's adjusted basis in that portion of the debt instrument or EGI as of the date of the deemed exchange. The holder also has a basis in the stock equal to that amount;
- The issuer is treated as retiring the portion of the debt instrument equal to its adjusted issue price as of the date of the deemed exchange; and
- Neither the holder nor the issuer accounts for accrued but unpaid interest or Sec. 988 foreign exchange gain or loss with respect to this interest. (Sec. 988 foreign exchange gain or loss is otherwise recognized.)27
Funding rule: A debt instrument is treated as stock to the extent it is both treated as funding a distribution or acquisition and is issued by a covered member to a member of its expanded group. A debt is treated as funding a distribution or acquisition if it is one of the following:
- A distribution of property by the funded member to a member of the funded member's EG, other than an exempt distribution—a distribution of stock pursuant to an asset reorganization that is permitted to be received without the recognition of gain or income under Sec. 354(a)(1) or 355(a)(1) or when Sec. 356 applies, that is not treated as "other property" or money described in Sec. 356 or a distribution of property in a complete liquidation under Sec. 336(a) or 337(a).
- An acquisition of EG stock, other than in an exempt exchange, by the funded member from a member of the funded member's EG in exchange for property other than EG stock.
- An acquisition of property by the funded member in an asset reorganization, but only to the extent that, pursuant to the plan of reorganization, a shareholder in the transferor corporation that is a member of the funded member's EG immediately before the reorganization receives "other property" or money within the meaning of Sec. 356 with respect to its stock in the transferor corporation.28
Whether a debt is issued with a principal purpose of funding one of these distributions or acquisitions is determined based on all the facts and circumstances. A debt instrument may be treated as issued with the principal purpose of funding a distribution or acquisition if it is issued before or after such distribution or acquisition.29
Per se rule: Except as provided below, a debt instrument is treated as issued with a principal purpose of funding a distribution or acquisition if it is issued by the funded member during the period beginning 36 months before the date of the distribution or acquisition and ending 36 months after the date of the distribution or acquisition. This is referred to in the regulations as the 72-month period.
Qualified short-term instruments: Temp. Regs. Sec. 1.385-3T(b)(3)(vii) excludes "cash pool" borrowing and other short-term debt from these provisions. A qualified short-term instrument is a covered instrument if it meets the specified current assets test or the 270-day test. A covered instrument meets the specified current assets test if the rate of interest charged does not exceed an arm's-length interest rate that would be charged with respect to a comparable debt instrument of the issuer with a term that does not exceed the longer of 90 days and the issuer's normal operating cycle, to the extent of the maximum outstanding balance.
The maximum outstanding balance is the total of the amounts owed by the issuer under certain covered debt instruments issued to members of the issuer's expanded group immediately after the covered debt instrument is issued, limited to the maximum of the amounts of specified current assets reasonably expected to be reflected, under applicable accounting principles, on the issuer's balance sheet as a result of transactions in the ordinary course of business during the subsequent 90-day period or the issuer's normal operating cycle, whichever is longer.
The 270-day test requires the CDI to have a term of 270 days or less or be an advance under a revolving credit agreement or similar arrangement. Again, the instrument must bear a rate of interest that does not exceed an arm's-length rate.
Ordinary-course loans, certain interest-free loans, and deposits with a qualified cash pool header are also excluded. An ordinary-course loan is excluded if the CDI is issued as consideration for the acquisition of property in the ordinary course of the issuer's trade or business, if the obligation will be repaid within 120 days of issuance. An interest-free loan is excluded if the instrument has no interest, original issue discount, or imputed interest. Deposits with a qualified cash pool header are excluded if the principal purpose of the arrangement is a cash management arrangement for EG members. A cash-management arrangement means an arrangement the principal purpose of which is to manage cash for participating expanded group members. Managing cash means borrowing excess funds from participating expanded group members and lending funds to participating expanded group members, and it may also include foreign exchange management, clearing payments, investing excess cash with an unrelated person, depositing excess cash with another qualified cash pool header, and settling intercompany accounts.30
Other Exceptions and Reductions
Regs. Secs. 1.385-3(c)(4) provides for a threshold exception, a current-year E&P exception, and a funded subsidiary exception.
Threshold exception: Regs. Sec. 1.385-3 does not apply if the EG has total EG debt of $50 million or less. If the EG debt is more than $50 million, Regs. Sec. 1.385-3 applies to only the excess over $50 million.
Current-year E&P reductions: The aggregate amounts by which the general rule or funding rule applies to distributions or acquisitions are reduced by the issuer's current-year E&P and E&P accumulated after April 4, 2016.
Funded subsidiary exception: An acquisition of EG stock (including by issuance) is not treated as an exchange for EG stock if, immediately after the acquisition, the acquirer of the EG stock controls the member of the EG that is the seller of the stock, and the acquirer does not relinquish control of the seller pursuant to a plan that existed on the date of the acquisition, other than in a transaction in which the seller ceases to be a member of the expanded group of which the acquirer is a member.31
Temp. Regs. Sec. 1.385-3T(d)(4) generally excludes instruments issued by a disregarded entity. However, if the disregarded entity is deemed to issue stock, the covered member that is the regarded member is deemed to issue the stock to the EG member to which the CDI was issued, and whether the stock is treated as debt is determined under the rules of these regulations.32 Temp. Regs. Sec. 1.385-3T(f) discusses the treatment of controlled partnerships. Generally, the regulations will not apply to debt instruments issued by partnerships. However, there is an anti-abuse provision with the purpose of preventing the use of partnerships to avoid the rules.
Under Regs. Sec. 1.385-3(b)(4), a debt instrument is treated as stock if it is issued with a principal purpose of avoiding the application of Regs. Sec. 1.385-3 or Temp. Regs. Sec. 1.385-3T. Examples included in this paragraph include a debt instrument that is:
- Issued to, and later acquired from, a person that is not a member of the issuer's EG;
- Issued to a person that is not a member of the issuer's EG, but the person later becomes a member of the EG;
- Issued to an entity that is not taxable as a corporation for U.S. tax purposes; or
- With respect to which a member of the issuer's EG is substituted as a new obligor or added as a co-obligor. 33
Temp. Regs. Sec. 1.385-4T: Treatment of Consolidated Groups
The temporary regulations generally treat consolidated groups, as defined in Regs. Sec. 1.1502-1(h), as one corporation for purposes of applying Regs. Sec. 1.385-3 and Temp. Regs. Sec. 1.385-3T.43 However, this section provides specific rules for determining covered debt exclusions, reduction for EG earnings, reduction for qualified contributions, order of operations, partnerships controlled by a consolidated group, application of the funding rule to departing members of the consolidated group that remain in the EG, and other issues related to the application of Regs. Sec. 1.385-3 and Temp. Regs. Sec. 1.385-3T in a consolidated group. For purposes of CDI exclusions under Regs. Sec. 1.385-3(g)(3) and qualified short-term debt under Regs. Sec. 1.385-3(b)(3)(vii), determinations are made on a separate-member basis.35
Regarding the reductions of Regs. Sec. 1.385-3(c)(3) to members of a consolidated group, a consolidated group maintains one EG earnings account that considers the E&P of the common parent. A regarded distribution or acquisition made by a member of a consolidated group is reduced by the EG earnings of the group. A qualified contribution made to a member of the consolidated group from outside the group is made to the group according to the one-corporation rule. Contributions of property among members of the consolidated group are not qualified contributions.36
In addition, Regs. Sec. 1.385-4T addresses the exit or entry of a debt instrument or corporation into the consolidated group. Regs. Sec. 1.385-3 will be applied to consolidated groups when an interest ceases to be a consolidated group debt instrument (CGDI) or becomes a CGDI.37
Debt Instrument Ceases to Be a CGDI but Continues to Be an EGI
A debt instrument will cease to be a CGDI in the following situations:
- The holder or issuer corporation ceases to be a member of the consolidated group but continues to be a member of the EG; or
- The debt instrument is transferred outside the consolidated group to a member of the EG.
Under Temp. Regs. Sec. 4T(c)(1)(i), when a corporation leaves the consolidated group, the issuer is treated as issuing new debt in exchange for property, and if considered a CDI treated as stock under Regs. Sec. 1.385-3, it is deemed to be exchanged for stock immediately.
Under Temp. Regs. Sec. 4T(c)(1)(ii), a debt instrument ceases to be a CGDI when it is transferred out of a consolidated group to a member of the EG. The debt instrument is treated as issued by the consolidated group to the EG member, and if considered a CDI treated as stock under Regs. Sec. 1.385-3, is deemed to be exchanged for stock immediately after the debt instrument is transferred out of the consolidated group.
Debt Instrument Entering a Consolidated Group
A CDI previously treated as stock under Regs. Sec. 1.385-3 becomes a CGDI upon entering the consolidated group. Immediately after the covered debt instrument becomes a consolidated group debt instrument, the issuer is deemed to issue a new covered debt instrument to the holder in exchange for the covered debt instrument that was treated as stock. The issuer is treated as issuing a new debt instrument to the holder in exchange for the CDI (previously treated as stock) immediately before it becomes a CGDI. As a result, Regs. Sec. 1.385-3(d)(2)(ii)(A) should be considered as to whether other CDIs of the issuer (including the consolidated group) may be treated as funding the regarded distribution or acquisition.
CGDI: A CDI issued and held by members of a consolidated group.38
Departing member: A member of an EG that leaves the consolidated group but continues to be a member of the EG.
Disregarded distribution or acquisition: A distribution or acquisition under Regs. Sec. 1.385-3(b)(2) or (b)(3)(i) between members of a consolidated group that is disregarded under the one-corporation rule.
Joining member: A member of an EG that becomes a member of the consolidated group and continues to be a member of the EG.
Regarded distribution or acquisition: A distribution or acquisition under Regs. Sec. 1.385-3(b)(2) or (b)(3)(i) that is not disregarded under the one-corporation rule.
This section applies to tax years ending on or after Jan. 19, 2017.
3Congressional Review Act, 5 U.S.C. §§801–808.
4See, e.g., press release, "Brady Statement in Response to Final Section 385 Regulations (Oct. 13, 2016).
5Administrative Procedure Act, P.L. 79-404, §4.
6Regs. Sec. 1.385-1(c)(1).
7Regs. Sec. 1.385-1(c)(3).
8Includible corporations are defined in Sec. 1504(b) as any corporation not on the list of excluded corporations.
9Regs. Sec. 1.385-1(c)(4).
10Regs. Sec. 1.385-1(d).
11Regs. Sec. 1.385-1(f).
12According to the preamble to the temporary and final regulations, the IRS requested comments on documentation and timing requirements for interests that are not in the form of indebtedness.
13Regs. Sec. 1.385-2(d).
14Regs. Sec. 1.385-2(c)(4).
15Regs. Sec. 1.385-2(c)(5).
16Regs. Sec. 1.385-2(b)(2).
17Regs. Sec. 1.385-2(c)(2)(i).
18Regs. Sec. 1.385-2(c)(2)(ii).
19Regs. Sec. 1.385-2(c)(2)(iii)(E).
20Regs. Sec. 1.385-2(c)(2)(iv)(A).
21Regs. Sec. 1.385-2(c)(2)(iv)(B).
22Regs. Sec. 1.385-2(c)(4).
23Regs. Sec. 1.385-2(c)(2)(iii)(A).
24Regs. Sec. 1.385-2(i).
25Temp. Regs. Sec. 1.385-3T(g)(5).
26Regs. Sec. 1.385-3(b)(2).
27Regs. Sec. 1.385-1(d).
28Regs. Sec. 1.385-3(b)(3).
29Regs. Sec. 1.385-3(b)(3)(iv).
30Temp. Regs. Sec. 1.385-3T(b)(3)(vii).
31Regs. Secs. 1.385-3(c)(2).
32Temp. Regs. Sec. 1.385-3T(d)(4).
33Regs. Sec. 1.385-3(b)(4).
34Temp. Regs. Sec. 1.385-4T(b)(1).
35Temp. Regs. Sec. 1.385-4T(b)(3).
36Temp. Regs. Sec. 1.385-4T(b)(4).
37Temp. Regs. Sec. 1.385-4T(c).
38Temp. Regs. Sec. 1.385-4T(e).
|Sharon Burnett is an associate professor and the Edwards Professor of Accounting, Karyn Bybee Friske is a professor of accounting and the Schaeffer Professor of Business Ethics, and Darlene Pulliam is a professor of accounting and the McCray Professor of Business and Regents Professor, all at West Texas A&M University. For more information on this article, contact firstname.lastname@example.org.