Tax Blog

The Third Circuit yesterday issued a harshly worded rebuke to the taxpayer in Merck v. United States, No. 10-2775 (Jun. 20, 2011), affirming the District Court’s decision that the taxpayer’s swap-and-assign transaction was really a disguised loan that gave rise to Subpart F income.  (See TaxProfBlog for a link to the opinion.)

Described briefly, the transactions at issue involved a U.S. company that entered into interest rate swap contracts with a foreign bank.  The company then assigned its right to receive payments under the swaps to foreign subsidiaries in exchange for ...