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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 l.jpg

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


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Example 1 investments


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  • 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?


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  • 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?


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    • 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?


  • Slide6 l.jpg

    • 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?


  • Slide7 l.jpg


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    Example 2 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?

    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


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    Example 3 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?

    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


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    Example 4 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?

    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


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    Example 5(a) 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?

    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


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    Example 5(b) 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?

    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