Although the proposed regulations do not discuss a borrowing affiliate
contributing to the capital of the investing affiliate
(rather than lending), H Enterprises would apply to link the borrowed funds with the dealer affiliate
's use of the funds.
The regulations currently contain a rule forestalling the recognition of surplus where capital property used in an active business is transferred to another foreign affiliate
and the transfer is eligible for rollover treatment under the local tax law.
And, although Cornwell owns nine of those 26 stations, he still felt inclined to pay for affiliate
programming while more established majority-owned stations receive payment for such an arrangement.
As a result, many of the firewalls overlap the restrictions of section 23B, which, as I noted, requires interaffiliate transactions to be at arm's length and on market terms but also prohibits a section 20 affiliate
from representing that an affiliated bank is responsible for its obligations and prohibits a bank from purchasing certain products from a section 20 affiliate
The immediate task of the transition coordinator, the PFP coordinator, and the new HKNC affiliate
was to put an effective subcommittee in place that would be representative of the individuals and families being served and would include those agencies, programs, and facilities that would be instrumental in providing those services.
The regulations currently contain a rule that prevents the recognition of surplus where capital property used in an active business is transferred to another foreign affiliate
, and the transfer is eligible for rollover treatment under the local tax law.
5(c) seemingly precludes the application of the due diligence exception for any foreign affiliate
conducting business activity in a jurisdiction where the taxpayer knows "in advance" that the information, including the tax returns for the affiliate
, cannot be supplied within 15 months of the close of the taxpayer's year.
Such an under-taking is a time-consuming and daunting task with respect to shares in controlled affiliates
and is typically deferred until the affiliate
is sold, or otherwise participates in a group reorganization.
For the foregoing reasons, we recommend that the effective date of the foreign affiliate
legislation be delayed, at a minimum, for one year to permit taxpayers to comprehend its scope, and, if prudent, restructure their operations to avoid the unintended operating and administrative costs imposed by the legislation.