Proposed Regs Look To Close CFC Loopholes

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

District Court Refuses To Dismiss FBAR Penalty Action Against Decedent’s Family

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

Final Regs Exclude Corporate U.S. Shareholders From Application of Section 956

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

IRS Issues Final Regs on Recognition and Deferral of Foreign Currency Gain or Loss

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

Court Upholds Freedom of Information Act Exemption for IRS

To satisfy its burden and withhold records under exemption 7(A), the agency must establish that 1) the documents were investigatory records compiled for law enforcement purposes, and 2) production of the documents would interfere with pending enforcement proceedings. Facts of the Case In October 2015, the taxpayer received two IRS notices asserting that, for the … Continued

IRS Finalizes FATCA Regs on Requirements for Sponsoring Entities

IRS Finalizes FATCA Regs on Requirements for Sponsoring Entities The final regs, which became effective on March 25, 2019, contain only limited revisions to proposed regs issued in 2017. FATCA, Generally The Hiring Incentives to Restore Employment Act of 2010 added Chapter 4 — that is, the FATCA — to the Internal Revenue Code. Under … Continued

Offsetting Foreign Currency Option Transaction Had No Economic Substance

Economic Substance Doctrine To determine whether a transaction has economic substance, courts usually make a two-pronged factual inquiry: The subjective test: Was the taxpayer motivated by no business purpose (other than getting tax benefits) in entering into the transaction? The objective test: Did the transaction have objective economic substance; in other words, was there a … Continued

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