Cross-border financing transactions allow companies with overseas subsidiaries to pay foreign taxes, receive a U.S. credit for paying those taxes and then effectively split the credit with foreign lenders which in turn lower their interest costs.
The IRS position is that foreign tax credits shouldn't be allowed for those transactions because the U.S. would effectively be subsidizing the lending of foreign banks since the U.S. company and the foreign bank share the tax break.
In addition, AIG said it had settled a tax dispute related to "lease-in lease-out" tax shelters and anticipated recording an after-tax charge of between $34 million and $100 million in the fourth quarter of this year.
See "AIG's tax dispute with U.S. has a twist of irony."
