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 Issues Final Regs on Recognition and Deferral of Foreign Currency Gain or Loss

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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Offsetting Foreign Currency Option Transaction Had No Economic Substance

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 …
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2018 Foreign Income/Housing Exclusions

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 …
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An Overview of the Proposed Regs on the FDII and GILTI Deduction

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, …
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Proposed Regs Set Out How To Determine FDII

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 …
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Doing business internationally: How we can help

Our international tax consultants assist clients in taking advantage of the numerous business opportunities that exist worldwide. Here are some of                                                                      …
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Tax Court Thwarts Use of Rule 155 to Raise New Issues

Rule 155 Basics Where the parties have made mutual concessions resolving certain issues, the Tax Court normally directs that decisions will be entered under Tax Court Rule 155(a). It provides that, “[w]here the Court has filed … its opinion … determining the issues in a case, it may withhold entry of its decision for the …
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