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Uses of Hybrids in Tax Planning for U.S. Outbound investments

Uses of Hybrids in Tax Planning for U.S. Outbound investments. Lawrence Lokken , University of Florida College of Law Werner Heyvaert , Stibbe, Brussels Kathleen Penny , Blake, Cassels & Graydon LLP, Toronto Marco Q. Rossi , Marco Q. Rossi & Associati, New York. Example 1.

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Uses of Hybrids in Tax Planning for U.S. Outbound investments

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  1. Uses of Hybrids in Tax Planning for U.S. Outbound investments Lawrence Lokken, University of Florida College of Law Werner Heyvaert, Stibbe, Brussels Kathleen Penny, Blake, Cassels & Graydon LLP, Toronto Marco Q. Rossi, Marco Q. Rossi & Associati, New York

  2. Example 1

  3. USCo is a Delaware limited liability company whose three owners are U.S. citizens residing in Florida. It has historically carried on business only in the Florida, but it now has an opportunity to acquire the assets of a business located in Ontario. • If the acquisition is completed, USCo will organize the newly acquired business as an Alberta unlimited liability company, AlCo. • What U.S. and Canadian tax issues should USCo anticipate with respect to the Canadian business if • USCo is a partnership for U.S. tax purposes and • AlCo is a corporation for U.S. tax purposes?

  4. USCo is a Delaware limited liability company whose three owners are U.S. citizens residing in Florida. It has historically carried on business only in the Florida, but it now has an opportunity to acquire the assets of a business located in Ontario. • If the acquisition is completed, USCo will organize the newly acquired business as an Alberta unlimited liability company, AlCo. • What U.S. and Canadian tax issues should USCo anticipate with respect to the Canadian business if • USCo is a partnership for U.S. tax purposes and • AlCo is a disregarded entity for U.S. tax purposes?

  5. USCo is a Delaware limited liability company whose three owners are U.S. citizens residing in Florida. It has historically carried on business only in the Florida, but it now has an opportunity to acquire the assets of a business located in Ontario. • If the acquisition is completed, USCo will organize the newly acquired business as an Alberta unlimited liability company, AlCo. • What U.S. and Canadian tax issues should USCo anticipate with respect to the Canadian business if • USCo elects to be a corporation for U.S. tax purposes and also elects to be an S corporation and • AlCo is a corporation for U.S. tax purposes?

  6. USCo is a Delaware limited liability company whose three owners are U.S. citizens residing in Florida. It has historically carried on business only in the Florida, but it now has an opportunity to acquire the assets of a business located in Ontario. • If the acquisition is completed, USCo will organize the newly acquired business as an Alberta unlimited liability company, AlCo. • What U.S. and Canadian tax issues should USCo anticipate with respect to the Canadian business if • USCo is an S corporation for U.S. tax purposes, and • AlCo is a disregarded entity for U.S. tax purposes?

  7. How would the analysis of each of these alternatives change if one of USCo’s three owners is a Canadian citizen who spends about 40 percent of her time in Florida and 60 percent of her time in Canada?

  8. Example 2 USCo USCo and USub are domestic corporations filing consolidated returns. 100% 50 % USub 50% PRS PRS is organized under the laws of country X. Its income, derived in the active conduct of business in country X, is taxed by country X at 20 percent. PRS is a partnership for country X tax purposes. It’s partners are legally liable for country X tax on its income. PRS elects to be a corporation for U.S. tax purposes. PRS is a reverse hybrid

  9. Example 3 USCo USCo is a Delaware corporation HoldCo HoldCo, OPCo1, and OPCo2 are corporations organized under the laws of country Y. They constitute a fiscal unity under the tax laws of country Y. HoldCo is a disregarded entity for U.S. tax purposes. OPCo1 and OPCo2 are corporations for U.S. tax purposes. OPCo1 OPCo2

  10. Example 4 USCo 100 % CayCo CayCo is a corporation organized in a tax haven country. OPCo is actively engaged in business in the country in which it is organized. It is a corporation for foreign tax law purposes and a disregarded entity for U.S. tax purposes. OPCo pays royalties to CayCo, which OPCo deducts in determining tax in its country of residence. 100 % OPCo

  11. Example 5(a) USCo USCo is a Delaware corporation HoldCo is a corporation for U.S. tax purposes. HoldCo HoldCo is organized under the laws of country X. OPCo1 is organized under the laws of country Y. OPCo2 isorganized under the laws of country Z. OPCo1 manufactures goods in country Y. OPCo2 purchases these goods and sells them to customers in country Z. OPCo1 OPCo2 OPCo1 and OPCo2 are corporations for U.S. tax purposes

  12. Example 5(b) USCo USCo is a Delaware corporation HoldCo is a corporation for U.S. tax purposes. HoldCo HoldCo is organized under the laws of country X. OPCo1 is organized under the laws of country Y. OPCo2 isorganized under the laws of country Z. OPCo1 manufactures goods in country Y. OPCo2 purchases these goods and sells them to customers in country Z. OPCo1 OPCo2 OPCo1 and OPCo2 are disregarded entities for U.S. tax purposes

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