International Tax Blog

New IRS Practice Units - FTC Carryback and Carryover & Liquidating Distributions of a Partner’s Interest in a Partnership

Last week the IRS published 2 new practice units related to international tax: FTC Carryback and Carryover Liquidating Distributions of a Partner’s Interest in a Partnership PDF We have added these practice units to our Practice Units By Topic page. Read more →

New IRS Practice Units: Reasonable Cause and Good Faith & FTC Limitation

The IRS recently published two new practice units related to international tax: Reasonable Cause and Good Faith and FTC Limitation. The first practice unit discusses the reasonable cause exception for penalty relief. The second practice unit discusses the foreign tax credit limitation for individuals. Foreign tax credits are generally limited to the U.S. tax on foreign income. We have added these practice units to our Practice Units By Topic page. Read more →

New IRS Practice Unit: Flow-Through Entities Effects on FTC

Yesterday the IRS published a new practice unit titled “Flow-Through Entities Effects on FTC.” This practice unit discusses how flow-through entities affect an individual’s foreign tax credit. We have added this practice unit to our Practice Units By Topic page. Read more →

Three New IRS Practice Units

Yesterday the IRS published three new practice units: Substantiation Requirements for Claiming FTCs Foreign Currency Translation for FTCs Installment Method for Installment Sales We have added these practice units to our Practice Units By Topic page. Read more →

India-U.S. Income Tax Treaty – Article 12, Fees For Included Services

Sometimes U.S. companies perform services in the U.S. for customers located in India and are surprised when the Indian customer withholds Indian taxes from the payment for those services. Most U.S. income tax treaties would not allow foreign taxes to be imposed on services performed in the U.S., where the U.S service-provider has no activity or permanent establishment in the foreign country. However, the India-U.S. Income Tax Treaty (the “Treaty”) is not a typical U.S.... Read more →

Updated IRS Practice Units by Topic Page

The IRS publishes Practice Units (“PUs”) (formerly "International" Practice Units) on its website. PUs provide IRS staff with explanations of general tax concepts, as well as information about specific types of transactions. These PUs discuss many U.S. international tax issues that are applicable to businesses. The IRS website does not categorize them by topic therefore it can be difficult to find PUs on a particular topic. Our page Practice Units by Topic categorizes the PUs... Read more →

Updated - IRS Practice Units by Topic

Recently, the IRS published 11 new International Practice Units (“IPUs”) on its website. We have updated our resource page that categorizes the IPUs by topic. The new IPUs include: IRC 367(d) Transactions in Conjunction with Cost Sharing Arrangements (CSA) Hedge Fund Basics Summary of Foreign and Domestic Loss Impacts on the Foreign Tax Credit How to Assess Penalties for Failure to File Form 8886 Disclosing IRC 988 losses Sourcing of Exchange Gains or Losses in... Read more →

IRS International Practice Units By Category

The IRS drafts publications that summarize in plain English U.S. tax rules for a variety of tax topics. A few of the publications discuss U.S. international tax issues. However, most of the IRS international publications deal with the U.S. taxation of individuals, and not with the U.S. taxation of businesses. For example, IRS publications do not cover Subpart F Income, outbound transfers to foreign corporations, transfer pricing, etc. To learn about these rules, one would... Read more →

New Videos - March 2016

Over the last month we have published videos discussing several of our situational charts along with IRS Form W-8BEN, linked to below. Rev. Rul. 54-105 - Individual Purchase & Sale of Prop. in Foreign Currency Rev. Rul. 70-373 - Deemed Paid Credits After Lower Tier Liq'n Rev. Rul. 72-354 - Sale of Stock to Qualify as a B Reorganization Rev. Rul. 72-197 - Foreign Taxes Paid By Reverse Hybrid Entity IRS Form W-8BEN Rev. Rul.... Read more →

Rev. Rul. 2016-8: Tax Aspects of the Cuban Thaw

Last week the IRS released Rev. Rul. 2016-8. The ruling removes certain restrictions that had been in place for over 25 years on income earned in Cuba. In particular, Cuba had been a country to which Code §901(j)(1)(A) had applied. Code §901(j)(1)(A) applies to any foreign country: the government of which the United States does not recognize, unless such government is otherwise eligible to purchase defense articles or services under the Arms Export Control Act,... Read more →

Chart of Rev. Rul. 84-125 - Accrual of Foreign Tax Credit on Contested Liability & 10 Year Limitations Period

Code §6511(d)(3)(A) provides that if the claim for credit or refund relates to an overpayment attributable to any taxes paid or accrued to any foreign country for which credit is allowed under Code §901, in lieu of the 3-year period of limitation prescribed in Code §6511(a), the period is 10 years “from the date prescribed by law for filing the return for the year in which such taxes were actually paid or accrued.” (the language... Read more →

International PLRs of Note for the 38th week of 2014

Today the IRS published the following Chief Counsel Advice relating to international taxation. CCA 201438020 - An individual who is present in the United States solely for the purpose of education, training, or obtaining special technical experience and who receives benefits under Article 20 (Students and Trainees) of the U.S.-China Income Tax Treaty (the “Treaty” or the “Chinese treaty”) may in certain circumstances, begin employment as a teacher, lecturer, or researcher in the United States... Read more →

Charts of Examples in Notice 2014-44

Last week the IRS released Notice 2014-44, announcing that regulations will be issued under Code §901(m). Code §901(m)(1) provides that, in the case of a covered asset acquisition ("CAA"), the disqualified portion of any foreign income tax determined with respect to the income or gain attributable to relevant foreign assets ("RFAs") will not be taken into account in determining the foreign tax credit allowed under Code §901(a), and in the case of foreign income tax... Read more →

International PLRs for the 49th week of 2013

Today the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201349003 - Late IC DISC election. Form 4876-A, Code §992(b)(1)(A). PLR 201349010, PLR 201349011, PLR 201349012 - Late/retroactive passive foreign investment company ("PFIC") qualified electing fund ("QEF") elections. Form 8621. Treas. Reg. §1.1295-3(f). CCA 201349015 - Addresses the determination of creditable foreign taxes of U.S. corporations (or controlled foreign corporations) with foreign disregarded entities or branches. U.S.... Read more →

Chart of Chief Counsel Advice AM2013-006: §302 Redemption Reduces CFC's Pool of Foreign Income Taxes

Below is a chart of Chief Counsel Advice AM2013-006 in which the I.R.S. addressed the effect of a Code §302 redemption on a controlled foreign corporation's ("CFC") pool of foreign taxes. In Year 1, the CFC redeemed all of its stock owned by one of its shareholders in a transaction that qualified as a Code §302 distribution. The distribution reduced its pool of undistributed earnings and profits. In Year 2, the CFC paid a dividend... Read more →

International PLRs for the 36th week of 2013

Today the IRS published the following Private Letter Rulings relating to international taxation. PLR 201336009, PLR 201336010, PLR201336011 - Late Canadian registered retirement savings plan ("RRSP") deferral elections, including a locked-in retirement account (LIRA), or Locked-in RRSP. Form 8891. Rev. Proc. 2002-23. PLR 201336013 - Late IC DISC election. Form 4876-A, Code §992(b)(1)(A). PLR 201336018 - In determining a domestic parent corporation's interest expense allocation and apportionment for foreign tax credit purposes, the adjusted basis... Read more →

International PLRs of the 30th week of 2013

For the 30th week of 2013, the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201330002 - Code §355 spin-off and reorganizations of foreign and domestic corporations owned by a U.S. parent corporation. Code §368(a)(1)(D). PLR 201330006 - Controlled foreign corporation's ("CFC's") distributive share of income from a foreign partnership is not includable in foreign base company income. Code §954. PLR 201330009 - Late entity classification election... Read more →

Famous Tax Quotes - Double Taxation Cannot Always Be Avoided

The following is a quote from the Tax Court regarding the computation of the foreign tax credit limitation: “[Elimination of double taxation is] admittedly the objective of the foreign tax credit. But . . . this objective cannot always be fully achieved.” Perkin-Elmer Corp. v. Commr., 103 T.C. 464 (1994). Read more →

International PLRs of the 21st week of 2013

For the 21st week of 2013, the IRS published the following Private Letter Rulings relating to international taxation. PLR 201321001, PLR 201321004, PLR 201321013, PLR 201321014, PLR 201321015 - Late entity classification election for a foreign entity to be treated as a disregarded entity. Form 8832. Treas. Reg. §301.7701-3(c). PLR 201321007 - Applicability of Code §§361 and 897 to a foreign corporation holding United States Real Property Interests ("USRPIs") when such corporation reincoroporates in the... Read more →

International PLRs of the 20th week of 2013

For the 20th week of 2013, the IRS published the following Chief Counsel Advice and Private Letter Ruling relating to international taxation. CCA 201320014 - IRS denied a U.S. corporation a section 245 dividends received deduction (DRD) from a foreign subsidiary using the substance over form doctrine. PLR 201320017: Taxpayer was permitted to change to the tax book value method of asset valuation for interest expense allocation. Temp. Treas. Reg. §§1.861-8T(c)(2) and 1.861-9T(g)(1)(ii). Read more →

Same Boat But Another Ocean

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: If 105% of gross receipts * * * does not satisfy the requirement, then 225% is in the same boat but another ocean. PPL Corp. and Subs. v. Commr., 665 F. 3d 60 (3rd Cir. 2011) Read more →

U.K. Remittance Basis Charge (“RBC”) is a Creditable Tax

In Rev. Rul. 2011-19, the I.R.S. held that the U.K. Remittance Basis Charge (“RBC”) is an income tax for which a credit is allowable under Code §901. The U.K. generally allows individuals who are U.K. residents but who are not domiciled in the United Kingdom (i.e., do not intend to live in the United Kingdom permanently) (non-domiciliaries) to elect each year to be taxed on an alternative basis. The default basis of taxation for non-domiciliaries... Read more →

Double Taxation on Services

Countries often impose withholding taxes on payments to nonresidents for the performance of services. For instance, the U.S. imposes a 30% withholding tax on certain U.S. source payments, including payments for services, to nonresidents. Code §§871(a)(1)(A) and 881(a)(1). The U.S. withholding tax is only imposed on “U.S. source” income. In the context of services, this generally means services performed in the U.S. Code §861(a)(3) and Treas. Reg. §1.861-4. A number of countries, however, impose withholding... Read more →

New Section 956 Foreign Tax Credit Blending Rule

Earlier this week, President Obama signed into law H.R. 1586. This new law has several important changes to U.S. international tax rules. Today’s blog post discusses the new Section 956 foreign tax credit blending rule. The new law adds a new subsection (subsection (c)) to Code § 960. Under this new rule, if there is a Section 956 inclusion where the U.S. shareholder will be allowed to claim deemed paid foreign tax credits (i.e., a... Read more →