The New Debt-Equity Regulations under the Internal Revenue Code

Authors

Christopher R. Hoyt, University of Missouri - Kansas City, School of LawFollow

Publication Date

1981

Document Type

Article

Abstract

One of the most litigated tax issues is whether an interest in a corporation is stock or debt. Although stock and debt have many similar characteristics, the tax consequences can vary drastically depending on which interest exists. Recognizing the need to end this uncertainty, Con­gress enacted section 385 of the Internal Revenue Code as part of the Tax Reform Act of 1969. That section authorized the Treasury Department to issue regulations distinguishing debt from equity for all tax purposes and listed five factors that may be considered. On December 29, 1980, the department filed final regulations scheduled to become effective on January 1, 1982. Although the regulations do not clarify all uncertainties, they do establish rules for the taxpayer to determine which interests the In­ternal Revenue Service will treat as stock and which it will treat as debt.

Publication Title

Missouri Law Review

Volume

46

Issue

4

Recommended Citation

Christopher R. Hoyt, The New Debt-Equity Regulations under the Internal Revenue Code, 46 Missouri Law Review 764 (1981).
Available at: https://irlaw.umkc.edu/faculty_works/459