Both the United States and foreign countries may tax the foreign source income of U.S. taxpayers. To ease this double taxation burden, the Internal Revenue Code permits most U.S. taxpayers who pay income taxes to a foreign country to either deduct the taxes from gross income for U.S. purposes or credit them dollar for dollar against …
In the recent case of Mendu v. United States, the U.S. Court of Federal Claims handed down a decision regarding whether penalties assessed for failure to file a FinCEN Report 114, “Report of Foreign Bank and Financial Accounts” (FBAR) are subject to the full payment rule. The result of the case sheds some light on this often-misunderstood …
In the recently issued Revenue Procedure 2021-26, the IRS provided guidance regarding accounting method changes made on behalf of controlled foreign corporations (CFCs) and, in some cases, other foreign corporations. Included in the guidance is an expansion, for a limited period, in the availability of automatic consent for CFCs to change their methods of accounting for …
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 — the partnership must adjust the basis of partnership property with respect to …
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 …
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, …
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 …
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 …
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. …
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. …
