Burger King Owners to Use Unusual Strategy to Avoid Anti-Inversion Penalty

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

Aug. 26 — The group of investors that controls Burger King Worldwide Inc. is using an unusual strategy to avoid the tax penalty that normally applies to shareholders of companies that shift their legal address out of the U.S.
The plan was disclosed Aug. 26 as part of Miami-based Burger King's $11 billion stock-and-cash deal to buy Tim Hortons Inc. and adopt that coffee chain's Canadian headquarters. The transaction is the first “inversion” announced since President Barack Obama called the strategy an “unpatriotic tax loophole” in late July and ordered regulatory changes to curb them (165 DTR G-2, 8/26/14).
Rather than take shares in the new combined Canadian company, 3G Capital, an investment fund with offices in New York and Rio de Janeiro will swap its majority stake in Burger King for interests in a related Canadian partnership that can be converted into stock, the companies said in a statement.