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Douglas S. Stransky, partner and leader of the Tax Practice Group, has published the second post in his series for the LexisNexis blog, examining the U.S. tax consequences that surface when a cross-border joint venture ends.

Using a hypothetical 50/50 venture between a U.S. manufacturer and a German strategic investing through a U.S. corporate blocker, the post explains how the Section 704(c) method choice buried in boilerplate moves real money between the partners, how the seven-year mixing bowl rules can turn an amicable separation into a taxable event and why the blocker structure that solved a classification problem at formation adds a level of tax at the exit. The lesson running through the piece is that these outcomes are set in the formation documents, years before anyone asks the question.

The post draws on themes from his LexisNexis treatise, International M&A and Joint Ventures: Key U.S. Taxation Issues, which devotes a full chapter to the U.S. tax considerations of joint ventures alongside case studies and sample transaction provisions.

Read the full post »