Steve Dixon Comments on Section 965 Deduction in Bloomberg BNA Tax Management Transfer Pricing Report

"BMC Software Says Closing Agreement Bars Retroactive Offset of Section 965 Deduction"
Bloomberg BNA Tax Management Transfer Pricing Report

Steve Dixon commented on BMC Software Inc.'s dispute with the Internal Revenue Service (IRS) regarding the retroactive offset of the Section 965 election. Dixon said the court may decide the broad legal question in the case, which is the definition of indebtedness under Section 965(b)(3). If the court rules on that issue, the decision might have implications for a number of taxpayers in similar circumstances, he said, but if the court rules only on the narrower issue of what BMC's closing agreement means, then the decision might settle the question only for BMC. "There are many avenues the court can take in reaching its conclusion," Dixon said. While it is possible the court could rule only on the broader legal question, "if you were to ask the IRS, I think they would tell you the court also has to rule on the issue of the closing agreement."

BMC asserts that the IRS did not make its legal position clear regarding accounts receivable until after BMC had entered into a closing agreement. "There is certainly a tension within the advice memorandum. If you are going to advise the field that they need to expressly reference Section 965, that arguably implies that the closing agreement must expressly reference Section 965," Dixon said, adding that the "advice memorandum is the IRS's interpretation of the law, but not the law itself."

This article also appeared in BNA Daily Report for Executives on May 7, 2014.

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