IRS Clarifies That a Typical “Bad Boy Guarantee” Will Not Cause an Otherwise Nonrecourse Financing to Be Treated as Recourse

On April 15, 2016, the IRS released a generic legal advice memorandum (the “GLAM”)¹ providing an important and helpful clarification of the treatment of a guarantee of a partnership nonrecourse liability when the guarantee is conditioned on certain typical “nonrecourse carve-out” events (commonly referred to as “bad boy guarantees”).

New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney www.sullcrom.com April 14, 2016 Related-Party Debt / Equity Regulations IRS Issues Proposed Regulations Intended to Limit Earnings Stripping but Which—if Finalized—Would Broadly Change the U.S. Tax Treatment of Related-Party Indebtedness SUMMARY On April 4, 2016, the IRS and Treasury Department issued proposed regulations (the “Proposed Regulations”) that would—if finalized in their current form—treat related-party debt as equity for U.S. tax purposes in certain circumstances.

District Court Order Paves the Way for the Republic of Argentina to Return to International Credit Markets

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