IRS Guidance Issued on New Interest Stripping Rules

The Tax Cuts and Jobs Act substantially modified the interest stripping rules of Code §163(j). In a recent IRS notice, the IRS provided guidance on some of the provisions of the revised limitation and what new regulations will say. Here are some highlights:

a. The old provision allowed for the carryforward of disallowed interest expense to future years. The notice advises that any disallowed interest expense for the last tax year beginning before 1/1/2018 can be carried over (to be subject to the new provisions in the next year). Such a carryforward does not apply to an “excess limitation carryforward” from such prior year. A similar provision applies to such a carryover in regard to the Code §59A base erosion minimum tax.

b. The new rules allow interest to be deducted to the extent of the taxpayer’s business interest income, plus 30% of adjusted. . .

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