New Sec. 901(m) limits the creditability of foreign taxes in certain acquisition transactions where a taxpayer receives a basis step-up for U.S. tax purposes but no corresponding basis step-up for foreign tax purposes.
Foreign tax credits
The Tax Court held that a bank was not entitled to the tax benefits generated by a STARS transaction because the transaction lacked economic substance.
The Supreme Court has granted certiorari in a Third Circuit case to resolve a circuit split and to answer the question of when a foreign tax is creditable under Sec. 901.
Treasury published temporary regulations to provide guidance on the Sec. 909 foreign tax credit splitter event provisions that were enacted in August 2010.
Many foreign countries have recently made statutory changes to their tax loss carryover periods and limitations that may affect the U.S. accounting for income taxes of any U.S. company with foreign subsidiaries operating in jurisdictions where the limitations have been enacted.
The IRS issued regulations on determining who has the legal liability to pay the foreign tax for foreign tax credit purposes and on the application of the “anti-splitter” rules of Sec. 909.
The IRS issued final regulations on determining who has the legal liability to pay the foreign tax for foreign tax credit purposes and temporary regulations on the application of the “anti-splitter” rules of Sec. 909.
Final regulations have been issued that provide guidance on determining the amount of taxes paid for purposes of determining the foreign tax credit.
This item explains significant changes to foreign tax credits made by the Education, Jobs, and Medicaid Assistance Act of 2010.
P.L. 111-226 makes changes to how corporations can use the foreign tax credit and also terminates the advance refundability of the earned income credit (under Sec. 3507), effective for tax years beginning after December 31, 2010.
The American Jobs Creation Act reduced the foreign tax credit limitation categories from eight to two: passive category income and general category income.