IRS Guides Taxation of Foreign Trust Distributions

The IRS’s Large Business and International Division (LB&I) recently issued a “process unit” that provides guidance on determining the tax on a distribution received by a beneficiary of a foreign nongrantor trust. Process units serve as training materials for IRS staff to enhance their understanding of general tax concepts and specific transaction types. Although process …
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Time running short to report foreign accounts to IRS

If you haven’t filed a Foreign Bank Account Report (FBAR) this year, there’s still time, but not much. United States persons with a financial interest in or signature authority over one or more foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year must file FinCEN Form 114, also known …
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Tax Court: IRS can’t collect Sec. 6038(b) penalties via levy

Under Section 6038 of the Internal Revenue Code, some U.S. taxpayers must comply with information reporting requirements regarding their interests in certain foreign corporations and partnerships. In the recent case of Alon Farhy v. Commissioner, the U.S. Tax Court was tasked with deciding whether the IRS can assess failure-to-file penalties in relation to Sec. 6038. Forms Not …
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IRS: Longer Period for Single-Country Documentation

The IRS recently announced through Notice 2023-31 that it will provide a longer transition period for the documentation requirement when the single-country exception to the source-based attribution requirement in the proposed foreign tax credit regulations is finalized. The amended transition period will provide that the required license agreement must be executed no later than 180 …
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New Treasury regs to implement Corporate Transparency Act

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) in September 2022 issued final regulations implementing the Corporate Transparency Act (CTA). The law requires certain business entities created or registered to do business in the United States to report identifying information about their “beneficial owners” to FinCEN. Recently, FinCEN issued frequently asked questions (FAQs) on these …
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Form BE-12 due for companies with 10%+ foreign ownership

Deadline to file is May 31 The BE-12 form is a survey conducted by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) to collect information on the activities of foreign-owned U.S. companies. This survey is conducted every five years – including 2023 — and is used to gather data on the operations, finances, …
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IRS issues final foreign tax credit regs

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 …
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In the courts: FBAR penalties and the full payment rule

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 …
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IRS addresses foreign corporations’ accounting changes

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 …
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Regs address partnership interests that results in adjustment

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 …
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