It doesn't make sense to allow certain taxpayers to choose whether they are a corporation or not. The US check-the-box rules, since 1997, have produced a boost to international tax arbitrage. The hybrid entities are the result of the discordances between different jurisdictions, qualifying them at the same time as corporation or pass-through. The misuse of hybrid entities offered a powerful tool for tax minimization on local and foreign earnings. It is not by chance that the financial sector took clear advantages through the special purpose vehicles, structured arrangements, loan and credit transactions and parking of assets for tax purposes. The hybrid entities or reversal hybrid entities meant an incentive for aggressive tax planning. The right solution should be the taxation of pass-through entities as corporations: the partnership income and the attribution income to the partners.
Intertax