An Overview of the Proposed Regs on the FDII and GILTI Deduction

An Overview of the Proposed Regs on the FDII and GILTI Deduction BackgroundThe Tax Cuts and Jobs Act (TCJA) established a “participation exemption system” under which certain earnings of a foreign corporation can be repatriated to a corporate U.S. shareholder without U.S. tax. (This occurs under Internal Revenue Code Section 245A.) However, Congress recognized that, … Continued

Proposed Regs Set Out How To Determine FDII

Proposed Regs Set Out How To Determine FDII Determining FDII Under the proposed regs, a domestic corporation’s FDII would be the corporation’s deemed intangible income (DII) multiplied by the corporation’s foreign-derived ratio. A domestic corporation’s DII would be the excess (if any) of the corporation’s deduction eligible income (DEI) over its deemed tangible income return … Continued

Court Defines “Financial Interest” and Makes Other FBAR Rulings

Court Defines “Financial Interest” and Makes Other FBAR Rulings Under the Law Every U.S. citizen who has a financial interest in, or signature or other authority over, a financial account in a foreign country is required to report the account to the IRS annually. This is done by filing an FBAR. The Secretary of the … Continued

Want to Do Business Across Borders?

Our international tax consultants assist clients in taking advantage of the numerous business opportunities that exist worldwide. Here are some of services we provide:  Complete tax planning, return preparation and filing to ensure U.S. and foreign compliance.  Planning to maximize foreign tax credits.  Review of transactions to ensure transfer pricing compliance.  Assisting employees who work … Continued

Tax Court Thwarts Use of Rule 155 to Raise New Issues

Rule 155 Basics Where the parties have made mutual concessions resolving certain issues, the Tax Court normally directs that decisions will be entered under Tax Court Rule 155(a). It provides that, “[w]here the Court has filed … its opinion … determining the issues in a case, it may withhold entry of its decision for the … Continued

Section 965 Transition Tax Forms and Instructions Now Available

Primary Requirements Sec. 965 generally requires U.S. shareholders to pay a “transition tax” on the untaxed foreign earnings of certain specified foreign corporations (SFCs) as if those earnings had been repatriated to the United States. More specifically, Sec. 965(a) provides rules for the last tax year of a deferred foreign income corporation (DFIC) that begins … Continued

Finalized Section 965 Transition Regs: Adjustments to E&P and Basis

For a summary of the changes brought forth under the final regs, see our article “Finalized Section 965 transition regs: An overview,” also in this issue. Here we’ll focus on adjustments to earnings and profits (E&P) and basis, as well as the application of Sec. 986(c) dealing with previously taxed E&P. Deferred Foreign Income Corporations … Continued

Finalized Section 965 Transition Regs: An Overview

The TCJA provides for a shift from the pre-2018 “worldwide” tax system to a “participation exemption system.” Under the old rules, U.S. taxpayers were generally taxed on all income whether earned in the U.S. or abroad, but foreign income earned by a foreign subsidiary of a U.S. corporation wouldn’t be subject to U.S. tax on … Continued

Claims Court Upholds FBAR Penalty Exceeding Regulatory Cap

As part of its Kimble v. U.S. decision, the court upheld the IRS’s imposed penalty of $697,229. Importantly, this amount exceeds the $100,000 maximum set out in regulations that haven’t been removed despite a statutory increase in the penalty amount. The court found that the revisions to the statute effectively nullified the contrary regs. FBAR … Continued