Stocks rebounded from Thursday's 1.2% "sell-off" today as heightened geopolitical risk in the Ukraine and Israel could not hold investors' attention. Yesterday's decline was substantial by the standards of the past several months of ultra-low volatility, but unremarkable in a broader context. The benchmark S&P 500 rose 1% on Friday, with the narrower Dow Jones Industrial Average (DJINDICES:^DJI) up 0.7%. The technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) finished up 1.6%. In company-specific news, AbbVie (NYSE:ABBV) is taking home the prize that is Ireland-based Shire (NASDAQ:SHPG) in a $54 billion deal, or perhaps it would be better said that part of the prize is being able to switch homes (see story below.)

Source: Wikimedia Commons.

On Monday, I wrote that AbbVie's takeover of Shire was going to happen, after Shire had announced that it was happy with the price of 53.20 pounds per share that AbbVie had come up with -- on its fifth offer, no less! Apparently, the two companies were able to successfully negotiate "the other terms of the offer," as they announced this morning that they would combine in a deal valued at $54 billion. But there's a third party that the two companies may yet have to reckon with -- the U.S. Treasury.

One of the reasons why AbbVie was able to raise its offer multiple times was because of the value of a particular feature of the deal that will enable it to switch its tax domicile to the U.K., under a process known as "tax inversion," thereby substantially lowering its tax rate. Shire is based in Ireland, and registered on the Channel Island of Jersey.

In the Powerpoint presentation [opens a PDF document] that AbbVie has put together to sell the transaction to shareholders, the company boasts: "AbbVie expects the effective tax rate for New AbbVie to approximate 13% by 2016; the new tax structure will provide AbbVie with flexible access to its global cash flows."

That 13% rate would represent a near halving of AbbVie's current tax rate – a hugely valuable improvement. The second clause refers to the fact that, post-acquisition, AbbVie will be able to access its worldwide profits without having to pay a 35% "repatriation" tax to the U.S. Treasury.

However, AbbVie may be counting its tax inversion before it's hatched. Writing to leaders of the congressional tax-writing committees on Tuesday, Treasury Secretary Jack Lew urged lawmakers to enact legislation that would curtail tax inversions. AbbVie expects the acquisition of Shire to close during the fourth quarter.

While the Congress does not appear to share the Obama administration's sense of urgency in regard to passing such legislation, it could still bear on this transaction if it were passed with retroactive effect. In his letter, Mr. Lew recommended making the law retroactive to May 2014. AbbVie shareholders had better hope the company left itself a margin of safety in accounting for the tax benefits of the deal.