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. …
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 …
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. …
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 …
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 …
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 …
Who’s a Qualified Individual? Section 911(a) and Sec. 911(c)(4) allow a “qualified individual” to exclude from taxation the individual’s foreign earned income and the housing cost amount. A qualified individual is one whose tax home is in a foreign country and who’s either a: U.S. citizen (or, in certain situations, U.S. resident alien) who satisfies …
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, …
Proposed Regs Set Out How To Determine FDII Determining FDII Under the proposed regs, a domestic corporation’s FDII would be the corporation’s deemed intangible income (DII) multiplied by the corporation’s foreign-derived ratio. A domestic corporation’s DII would be the excess (if any) of the corporation’s deduction eligible income (DEI) over its deemed tangible income return …
Court Defines “Financial Interest” and Makes Other FBAR Rulings Under the Law Every U.S. citizen who has a financial interest in, or signature or other authority over, a financial account in a foreign country is required to report the account to the IRS annually. This is done by filing an FBAR. The Secretary of the …
