International Tax Monthly

Finalized Section 965 Transition Regs: Adjustments to E&P and Basis

For a summary of the changes brought forth under the final regs, see our article “Finalized Section 965 transition regs: An overview,” also in this issue. Here we’ll focus on adjustments to earnings and profits (E&P) and basis, as well as the application of Sec. 986(c) dealing with previously taxed E&P. Deferred Foreign Income Corporations … Continued

Finalized Section 965 Transition Regs: An Overview

The TCJA provides for a shift from the pre-2018 “worldwide” tax system to a “participation exemption system.” 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 wouldn’t be subject to U.S. tax on … Continued

Claims Court Upholds FBAR Penalty Exceeding Regulatory Cap

As part of its Kimble v. U.S. decision, the court upheld the IRS’s imposed penalty of $697,229. Importantly, this amount exceeds the $100,000 maximum set out in regulations that haven’t been removed despite a statutory increase in the penalty amount. The court found that the revisions to the statute effectively nullified the contrary regs. FBAR … Continued

Iraq-Based Worker Was Entitled to Foreign Earned Income Exclusion

Tax Code Background Internal Revenue Code Section 911(a) provides that a qualified individual may elect to exclude his or her foreign earned income from gross income, subject to limitations set out in Sec. 911(b)(2). To be entitled to this exclusion, a taxpayer must be: An individual “whose tax home is in a foreign country,” and … Continued

Limit on FBAR Willful Violation Penalty Applies Annually

Limit on FBAR Willful Violation Penalty Applies Annually Report Required 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 on an FBAR. The Secretary of the Treasury may impose a civil monetary … Continued

IRS Releases Corporation Foreign Tax Credit Form and Instructions

IRS Releases Corporation Foreign Tax Credit Form and Instructions Credit Overview The United States, its possessions and foreign countries may tax the foreign source income of U.S. taxpayers. The amount of taxes imposed by U.S. possessions and foreign countries is allowed as a credit against U.S. taxes under Internal Revenue Code Section 901. If the … Continued

RICs Can Defer Distributing Transition Tax Amount

In a Revenue Procedure, the IRS has allowed regulated investment companies (RICs) to postpone to 2018 the inclusion of the Code Section 965 transition tax in gross income for purposes of computing their required distributions. RICs can be any of several financial entities, from mutual fund trade funds to real estate investment rusts or unit … Continued

All Combat-Zone Contract Workers Now May Qualify for Income Exclusion

U.S. citizens or resident aliens, and specifically contractors or their employees supporting the U.S. Armed Forces in combat zones, may qualify for the foreign earned income exclusion.  Qualified individuals may exclude from gross income, subject to certain limitations, wages or self-employment income earned for services performed outside the United States. To be entitled, however, a … Continued

Do you own any part of a Foreign Disregarded Entity?

If your answer is yes, you have a minimum requirement to file Form 8858. The amount of your involvement is a deciding factor for the requirement of filing additional forms such as Schedules C, H and M, to list a few. Form 8858 is a common form missed by many taxpayers year after year and … Continued

IRS Adds to Lists of Countries with Reporting Requirements

The IRS has updated two lists of countries with which the U.S. has an agreement that requires certain payments to be reported to the United States. One list is of countries with which the United States has an income tax or other treaty or a bilateral agreement; the other is of countries with which the … Continued