IRS Issues Q&As on Section 965 Transfer and Consent Agreements

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 …
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Six Issues Targeted in IRS Compliance Campaigns

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, …
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FATCA: Key Certifications & Periodic Review Requirements

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 …
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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 …
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District Court Refuses To Dismiss FBAR Penalty Action

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. …
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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. …
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Proposed Regs affect S corps, allocations, non-resident aliens

Quick Take:  Proposed regulations would modify the allocation rules to require that the S corporation income of the electing small business trust (ESBT) be included in the S portion of the ESBT if that income otherwise would have been allocated to a non-resident alien (NRA) deemed owner under the grantor trust rules. The proposed regs …
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IRS: Final Regs Related to Foreign Currency

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. …
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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 …
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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 …
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