Structuring Inbound Investments: A Primer on Exit Issues

Anthony C. Infanti, University of Pittsburgh School of Law

Abstract

As technology renders the world a smaller and smaller place, an increasing number of tax practitioners are finding it necessary to provide tax advice with respect to cross-border transactions.

This article is intended for the tax practitioner who has little or no knowledge of the international rules in the Internal Revenue Code and who is faced with developing a structure for a foreign client's proposed investment in the United States (a so-called "inbound" investment). The article briefly describes the pertinent provisions in the Internal Revenue Code, and then, through a series of examples, attempts to demonstrate how the manner in which an inbound investment is initially structured can greatly impact the tax cost that will be incurred by the foreign client when he/she/it sells or disposes of (i.e., "exits") the proposed inbound investment. The purpose of the article is to help the practitioner make an informed decision concerning the most appropriate structure for the proposed inbound investment.