International Tax Monthly

Final Regs Address Partnership’s Allocation of Creditable Foreign Tax Expenditures Section 743(b) Adjustments In the case of a transfer of a partnership interest that results in an adjustment under Internal Revenue Code Section 743(b) — because the partnership has a Sec. 754 election in effect or because there’s a substantial built-in loss in the partnership … Continued

IRS Issues Q&As on Section 965 Transfer and Consent Agreements 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 wasn’t subject to U.S. tax on that income until it was “repatriated” to the United … Continued

Six Issues Targeted in IRS Compliance Campaigns Here’s a look at the six issues the IRS is currently targeting:  1.  S corporation built-in gains (BIG) tax. An S corporation that used to be a C corporation is subject to the BIG tax when the S corporation: Has a net unrealized built-in gain on the C corporation’s assets, … Continued

FATCA: Explanations of Key Certifications and Periodic Review Requirements   FAQ 2: How should the independence standard for an external reviewer of a QI, WP or WT be applied for periodic review years before 2019? The IRS says that, for review years before 2019, the agency will permit an external reviewer of a QI, WP … Continued

IRS Finalizes Certain Foreign Tax Credit Regulations Applicability Date Under Sec. 78 The proposed FTC regs provide that amounts treated as dividends under Sec. 78 (Sec. 78 dividends) that relate to tax years of foreign corporations that begin before January 1, 2018, as well as Sec. 78 dividends that relate to later tax years, aren’t … Continued

The IRS is concerned that, in certain situations, the current rules and regs could produce inappropriate results when defining a “related person” for purposes of Internal Revenue Code Sec. 954(d)(3). The proposed regs would provide that the applicable rules and related regulations wouldn’t apply for purposes of Sec. 954(d)(3) and related regulations. However, this wouldn’t … Continued

In the recent case of U.S. v. Park, a federal district court refused to dismiss an action to collect an FBAR penalty from a decedent’s family. In the court’s view, the IRS provided sufficient factual detail about the penalty and assessment, the penalty didn’t exceed the statutory maximum, and the assessment survived the decedent’s death. … Continued

Allocation of Hypothetical Distribution Under Sec. 957, a controlled foreign corporation (CFC) is one under which more than 50% of the total combined voting power of all classes of stock entitled to vote or of the total value of the stock of the corporation is owned (directly, indirectly, or constructively) by U.S. shareholders. A U.S. … Continued

Background on ESBTs Under the Internal Revenue Code, an S corporation cannot have an NRA as a shareholder. In addition, there are limits on the types of trusts that can be S corporation shareholders. One such permitted trust is an ESBT. There are several requirements for a trust to be an ESBT, but nothing prevents … Continued

The final regs withdraw prior temporary regs on the allocation of assets and liabilities of certain partnerships for purposes of Sec. 987. The regs are effective when published. Functional Currency U.S. taxpayers are generally required to make all federal income tax determinations in their “functional currency.” A U.S. taxpayer’s functional currency is generally the U.S. … Continued