The IRS has designated the obligation of U.S. withholding agents to report and withhold on U.S.-source fixed or determinable annual or periodic (FDAP) income as a Large and Mid-Size Business (LMSB) Division Tier 1 issue.
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International Tax
Report on Foreign Bank and Financial Accounts: Compliance and Controversy
In recent months, concern over who is required to file the FBAR has escalated among taxpayers and tax practitioners alike. Along with stepped-up enforcement by Treasury and the IRS, this has made for a very interesting and challenging period in the life of the FBAR reporting requirement.
New Form 926: Return by a U.S. Transferor of Property to a Foreign Corporation
This article focuses on the history and purpose of Form 926 and describes changes that were made effective beginning in December 2008.
IRS Extends FBAR Filing Date for 2008 Filings
The IRS announced in Notice 2009-62 that it is extending for certain taxpayers the due date for filing calendar-year 2008 Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). Because Treasury is still working out various FBAR filing issues, it has decided to give certain taxpayers until June 30, 2010, to file FBARs for 2008 and earlier calendar years.
Preparing Canadian Structures for 2010
Effective January 1, 2010, Canada will look through tax-transparent U.S. LLCs and determine treaty eligibility at the member level.
Regs. Issued on 10/50 Foreign Corporations and Surrogate Corporations
The IRS has released final regulations on the application of separate foreign tax credit limitations to dividends received from noncontrolled Sec. 902 corporations (i.e., 10/50 corporations) (T.D. 9452).
U.S. Tax Effects of a Foreign Jurisdiction Audit
A tax audit in a foreign jurisdiction may affect the amount of foreign tax credit that a taxpayer claimed on a U.S. return for a prior year. To obtain the benefit of an increased foreign tax credit, the U.S. taxpayer’s claim for credit or refund must be timely.
Revised Form 1120-F: Practical Issues and Missed Opportunities
In early 2007, the IRS published a substantially revised Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, to be used for tax years beginning in 2007.
Initial IRS Guidance Addressing EU Cap-and-Trade Systems, Subpart F Rules
In Letter Ruling 200825009, the IRS addressed for the first time the subpart F treatment of gains on sale of surplus carbon dioxide (CO2) emissions allowances.
Report of Foreign Bank and Financial Accounts: Significant Revisions and Severe Penalties
This article discusses new traps for the uninitiated created by these revisions and the new reporting requirements for certain taxpayers who previously may not have been required to file this form.
Effect of Debt Recharacterization on Worthless Securities Deductions
The IRS recently addressed concerns that the recharacterization of intercompany debt as common equity might prevent a worthless securities deduction.
Expatriation and the New Mark-to-Market Rules
New rules subject taxpayers that renounce their U.S. citizenship or abandon their U.S. residency to a mark-to-market exit tax on their assets.
Adopting or Changing a Foreign Corporation’s Accounting Method
Many companies are experiencing decreased cashflow during the present economic downturn and as a result are evaluating options to raise cash to fund ongoing business operations. One option that U.S. multinational corporations may consider is repatriation of earnings from related foreign corporations.
FBAR Penalties Reduced for Six Months
The IRS has provided a framework for voluntary disclosure requests containing offshore issues, such as previously undisclosed foreign financial accounts and entities.
Subpart F and the New Contract Manufacturing Regs.
Final regulations were issued on the application of the manufacturing exception to certain contract manufacturing arrangements—arrangements where a CFC does not itself perform the manufacturing but instead contracts with a third party to perform the manufacturing.
Tax Treaty Net Basis Elections
Tax treaties may offer special elections that recharacterize certain types of FDAP income that would otherwise be subject to withholding tax as effectively connected and thus taxable on a net basis at U.S. graduated rates.
Transfer Pricing: The New Temporary Cost-Sharing Regs.
On December 31, 2008, the IRS introduced new temporary cost-sharing regulations (T.D. 9441) that replace the old cost-sharing regulations introduced in 1995.
New Subpart F Regs. Address Manufacturing Exception and Branch Rules
Treasury published final, temporary, and proposed regulations under Sec. 954 addressing the treatment of contract manufacturing arrangements and the branch rules applicable to foreign base company sales income (FBCSI), a type of subpart F income applicable to the sale of inventory.
IRS Provides a Simplified Method for Late Filing Relief
The IRS has provided a simplified method to request relief for certain late filings under Secs. 897 and 1445.
IRS Crackdown on Form 5471: A Sign of Things to Come?
In August 2008, the IRS began sending “soft” letters to corporate taxpayers warning that beginning in 2009, the Service would automatically assert penalties on any late-filed Forms 1120 that include a Form 5471.
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