What partnerships, S corporations, and others with foreign partnership interests need to know for tax year 2021 and beyond.
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International Tax
Tax credit did not independently arise under treaties
Given the proliferation of use of the model treaty language, most U.S. citizens living abroad will continue to find a foreign tax credit unavailable against their net investment income, even when that income is taxed by other countries.
Final regulations affect owners of foreign stock
Final and proposed regulations cover PFIC and CFC stock held through domestic partnerships and S corporations.
IRS extends withholding date for certain PTP transfers, distributions
The IRS announced that it will amend the regulations under Secs. 1446(a) and 1446(f) to defer the applicability date of certain provisions by one year to Jan. 1, 2023.
Reversing a gap period transaction through late check-the-box election
The IRS permitted a taxpayer effectively to undo planning undertaken during the so-called gap period (described later).
Senate Finance Committee releases tax provisions of Build Back Better Act
The Senate Finance Committee’s text includes changes from the House’s version of the bill, including a removal of the House’s increase in the SALT deduction cap.
Tax provisions in the Build Back Better Act
The Build Back Better Act contains a large number of tax provisions, ranging from an extension of the advance child tax credit, to a wide variety of green energy tax incentives, and a minimum tax on corporations.
IRS provides new guidance on accounting method changes for CFCs
For a limited time, the IRS is allowing automatic change procedures for CFCs changing to the ADS method and has clarified the process and certain aspects of audit protection.
Tax treaties do not provide a foreign tax credit against net investment income tax
A U.S. taxpayer living abroad was not entitled to take a foreign tax credit against her net investment income tax based on provisions in the United States–France and United States–Italy tax treaties.
Foreign taxes on PTEP can provide additional foreign tax credits
This item focuses on the potential increase in the Sec. 904(a) foreign tax credit limitation when PTEP
is distributed by a CFC to its corporate “U.S. shareholder.”
Penalty for failure to report distribution from foreign trust not reduced
The penalty for failure to report a distribution from a foreign trust is not reduced when the trust beneficiary is also the trust owner.
Automatic procedures to change a CFC’s depreciation method
The IRS issued Rev. Proc. 2021-26, which contains procedures for certain foreign corporations to obtain automatic consent to change their methods of accounting for depreciation to the alternative depreciation system.
Foreign notional interest regimes may hinder deductions of US subsidiaries
Inbound structures involving interest or royalty
payments by U.S. subsidiaries to foreign affiliates may trigger anti-avoidance rules where the foreign affiliates operate in countries that have notional interest deduction tax regimes.
Final regs. issued on qualified improvement property under FDII, GILTI
Final regulations clarify the treatment of qualified improvement property in FDII and GILTI, and foreign tax credit transition rules address post-2017 NOL carrybacks to pre-2018 tax years.
Foreign-derived intangible income: Issues and practical strategies
This article discusses issues that have evolved around FDII where there has been little guidance and outlines ways to better take advantage of the FDII regime.
Court says statutory language precludes substance-over-form analysis
The plain language of the statute allowed taxpayers to shelter income from all tax using a foreign sales
corporation and Roth IRAs.
PFIC considerations for non-US SPACs
As SPAC activity has increased, non-U.S.-domiciled
SPACs have become more prevalent and carry major U.S. tax-compliance ramifications due to their potential treatment as a PFIC for U.S. investors.
Failure-to-deposit penalty when tax is not withheld on payments of US-source income
This item provides an overview of potential penalties and presents an argument as to why the
Sec. 6656 failure-to-deposit penalty may not apply in some instances.
Penalty relief for Forms 5471, 5472, and 8865
Various options are available for mitigating penalties for noncompliance with foreign return filing requirements.
Virtual currency update
Treasury takes a more aggressive stance on reporting of virtual currency transactions.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
