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Question regarding Thin Capitalization
04-26-2011, 06:25 AM,
#1
Question regarding Thin Capitalization
Upon reading the section it appears as if the section is fixing a certain (and fixed level) of foreign debt for the whole year. The level its fixing is the greatest amount of foreign debt at any point in time in the tax year.

Is that true or is 'foreign debt' supposed to vary during the tax year and the inadmissible profit on debt computed for 'each period' in a tax year.

For example
Special Tax Year Jan-Dec

1.1.11 Foreign debt = 100m
1.3.11 Foreign debt received = 40m (now at 140m)
1.6.11 Foreign debt repaid = 20m (now at 120m)
No other transactions during the year

So would foreign debt for the purposes of the whole tax year be fixed at 140m or would we compute inadmissible profit on debt for the periods 1.1.11-28.2.11, 1.3.11-31.5.11 and 1.6.11-31.12.11 separately taking foreign debt as 100m, 140m and 120m respectively?

Thank you
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