Disguised sales and earnings stripping

Disguised sales and earnings stripping

October 01, 2017 | By Keith Martin in Washington, DC

The US Treasury moved closer in early October to withdrawing two sets of tax regulations the IRS issued in 2016 that would affect the project finance market.

One deals with “disguised sales” of assets by partners to partnerships.

A developer forming a partnership with an investor to own a project on which the developer has been working is sometimes treated as having made a taxable sale of the project to the partnership rather than a tax-free capital contribution. A developer is assumed to have made a “disguised sale” of the project if the developer is distributed cash by the partnership within two years after contributing the project.

This basic principle is not in dispute