Tax Court's ‘Canal' Ruling Has Debt-Financed Distributions Implications

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

The U.S. Tax Court's August decision in Canal Corp. v. Commissionerthat a leveraged partnership transaction was taxable under the partnership disguised sale rules raises not only issues for debt-financed distributions, but issues regarding the court's treatment of opinions and the circumstances under which penalties will be applied, practitioners say. “This case has broad implications for opinions and penalties,” Jeffrey H. Paravano, managing partner at Baker Hostetler LLP in Washington, D.C., says at a luncheon sponsored by the D.C. Bar Taxation Section. Practitioners at the luncheon also say they were troubled by the court's decision to ignore an intercompany obligation in applying the partnership rules. 

Request Daily Tax Report