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Abstract

Ten years ago, the United States Treasury Department promulgated Regulations on the income tax classification of business entities. Most business entities, domestic and foreign, may elect for United States tax purposes to be treated as an independent entity, ie, a corporation separate and distinct from its shareholders, or as a transparent organization, either a partnership or a branch depending upon the number of owners. Particularly in the international arena, the 'check-the-box' election has revolutionised the practice of international tax law, not always for the good from the standpoint of sound international tax policy. The possibility of being simultaneously a separate entity for tax purposes under the law of a foreign jurisdiction, while being transparent for United States purposes and vice versa, has created planning opportunities previously beyond reach and frequently in conflict with the purpose of the existing international tax legislation. What, if anything, should be done about these aberrational consequences?

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