Title: Tax planning strategies for corporate inversion

Authors: James G.S. Yang

Addresses: Montclair State University, Montclair, New Jersey 07043, USA

Abstract: This article investigates the problem of corporate inversion. It describes how international transactions are taxed in the United States and points out the possible tax loopholes. This paper shows that the tax rate in the United States is one of the highest in the industrialised countries and imposes tax on the basis of worldwide income, rather than domestic income only. This paper then explains how the corporate inversion was employed to take advantage of the pitfalls in the tax law. It uses four cases for demonstration - McDermott, Helen of Troy, Burger King, and Medtronic. This paper illustrates one example to determine the amount of tax savings using corporate inversion. It further looks into the anti-corporate inversion regulations under IRC §7874, the Internal Revenue Service (IRS) Notices 2014-52 and 2015-79, and the Treasury Regulations TD 9761. This paper also offers some strategies to maximise the benefits of corporate inversion.

Keywords: corporate inversion; controlled foreign corporation; international taxation; merger; worldwide income; territorial income; US-sourced income; foreign-sourced income.

DOI: 10.1504/IJAF.2018.093242

International Journal of Accounting and Finance, 2018 Vol.8 No.2, pp.103 - 121

Received: 18 Jun 2016
Accepted: 17 Jul 2017
Published online: 24 Jul 2018 *

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