Supreme Court of Iceland: Interest on a loan and carry-forward of losses by acquiring company denied due to lack of real operational purpose

The Supreme Court of Iceland (the Court) gave its decision on 23 January 2014 in the case of Samherji hf. v. the Icelandic Government (No. 529/2013). Details of the decision are summarized below.
(a) Facts. Company F (Co F), which was owned by majority shareholders of Company S (Co S), entered into considerable debt to acquire shares in Co S (i.e. a leveraged takeover). Both companies were subsequently merged with a "reversed merger" in which Co F was the acquired company and Co S the acquiring …