“Blockers,” “Stoppers,” and the Entity Classification Rules

Tax Lawyer, Vol. 64, No. 1 BLOCKERS, STOPPERS, AND THE Entity Classification Rules 1 Blockers, Stoppers, and the Entity Classification RulesWILLARD B. TAYLOR*I. IntroductionTax lawyers often refer to blockers or stoppers what are these? Generi-cally, a blocker or stopper is an Entity inserted in a structure to change the character of the underlying income or assets, or both, to address Entity quali-fication issues, to change the method of reporting, or otherwise to get a result that would not be available without the use of more than one Entity . One example, discussed further below, would be a case where a regulated invest-ment company (RIC) organizes a foreign subsidiary to invest in commodities or otherwise makes investments that could not be made by the RIC directly without jeopardizing its qualification, and thus converts bad assets and income into assets ( , shares of the foreign subsidiary) and income ( , dividends, subpart F inclusions, and gains from sales of the shares) that are good for RIC qualification purposes.

2 SECTION OF TAXATION Tax Lawyer, Vol. 64, No. 1 What, then, is the point of laying all of this out? What the examples show, at least to me, is the huge contribution made to the complexity of the tax law

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  Entity, Classification, Taxation, Stopper, And the entity classification

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