Current Tax Issues with Respect to International Treasury Operations

These are exciting times for both corporate treasury groups and the tax groups that support them. The foreign currency markets are volatile, and the future of the euro is uncertain. Meanwhile, the IRS has stepped up its audit scrutiny of financial transactions and foreign currency issues to an unprecedented level. This session will review ways in which multinational corporations are attempting to manage currency risk as well as recent experience with IRS examinations of such techniques. The topics covered will include:

• Hedging the foreign currency purchase price in foreign stock acquisitions, and recent IRS attempts to disallow losses on such hedges
• Hedging foreign currency exposures in controlled foreign corporations, and recent challenges by the IRS to the claims of the "business needs" hedging exception from subpart F. The tax treatment of hedges of disregarded transactions will be discussed
• Structuring hedges of excess cash balances in controlled foreign corporations to avoid subpart F whipsaws