US tax uncertainty remains for foreign distressed debt buyers

The distinction between distressed debt investing and running a lending business remains unclear after a recent IRS memorandum.

The US Internal Revenue Service has issued a new memorandum on US lending activities by foreign entities, which does little to clarify how the activities of offshore investment funds will be characterised for tax purposes.

The memorandum sheds light on how to draw the line between investment activities and the active conduct of a finance business.