International Tax Blog

11 New Charts of Foreign Trust Distributions Through Intermediaries

Treas. Reg. §1.643(h)-1(a)(1) provides that any property transferred to a U.S. person by an intermediary who has received property from a foreign nongrantor trust will be treated as property transferred directly by the foreign nongrantor trust to the U.S. person, if the intermediary received the property pursuant to a plan that had tax avoidance as a principal purpose. A rebuttable presumption of tax avoidance is created if the U.S. person is related to the grantor... Read more →

New Videos - October 2016

Over the last month we have published videos on our YouTube channel Andrew Mitchel Tax discussing several of our situational charts, linked to below. Rev. Rul. 2004-59, Partnership Conversion to Corporation Rev. Rul. 2004-77, Disregarded Entity With Two Owners Rev. Rul. 2004-83, Related Stock Purchase & Liquidation Treated as a D Reorganization Rev. Rul. 2004-85, "F" Reorganization of an S Corp Did Not Terminate Qsub Election for Subsidiary Plantation Patterns - Shareholder/Guarantor Treated as Borrower... Read more →

Over 50 New Situational Charts – Code §7874 Regulation Examples

Earlier this year, the IRS released T.D. 9761, which included final and temporary regulations under Code §7874. The regulations contain new rules addressing inversions and certain post-inversion tax avoidance transactions. Today we have released over 50 situational charts that illustrate all of the examples embedded in the Code §7874 regulations. Specifically, the situational charts include the examples found in the following regulation sections: Treas. Reg. §1.7874–1 Disregard of affiliate-owned stock Treas. Reg. §1.7874–2 & –2T... Read more →

New Videos - September 2016

Over the last month we have published videos on our YouTube channel Andrew Mitchel Tax discussing several of our situational charts, linked to below. Rev. Rul. 99-6, Situation 1, Partnership to Disregarded Entity Rev. Rul. 99-6, Situation 2, Partnership to Disregarded Entity Notice 2001-17, Contingent Liability Tax Shelter Rev. Rul. 2004-3, Foreign Partner Deemed to be Engaged in the Conduct of U.S. Trade or Business You can view the situational charts and associated videos, on... Read more →

New Videos - July 2016

Over the last month we have published videos on our YouTube channel Andrew Mitchel Tax discussing several of our situational charts, linked to below. Rev. Rul. 86-138, Separate Statement of Items for Tiered Partnerships Rev. Rul. 87-96, Intercompany Dividend of Foreign Subsidiary Triggers Deferred 311(b) and 1248 Gains Rev. Rul. 88-25, Domestication is an F Reorganization Rev. Rul. 89-46, Ownership Attribution in Consolidated Group for 351 Exchange Rev. Rul. 89-101, 355 Spin-Off To Reduce Foreign... Read more →

New Videos - June 2016

Over the last month we have published videos on our YouTube channel Andrew Mitchel Tax discussing several of our situational charts along with IRS Form 5471 Schedule O and Form 5472, linked to below. Rev. Rul. 84-2 - Section 332 Liquidation With Creation of Nominee Entity Rev. Rul. 84-68 - Parent Payment of Bonuses to Subsidiary Employees Rev. Rul. 84-111, Situation 1 - Assets Over Conversion of Partnership to Corporation Form 5472, Info. Return of... Read more →

New Videos - May 2016

Over the last month we have published videos discussing several of our situational charts along with IRS Form 5471 Schedule M and Form 926, linked to below. Rev. Rul. 78-401 - No Meaningful Reduction in Proportionate Interest Upon Redemption Rev. Rul. 76-454 - Constructive Dividend as Part of 351 Exchange Rev. Rul. 78-281 - Non-Functional Currency Borrowing Form 5471 Schedule M - Transactions Between CFCs and Related Persons Rev. Rul. 79-70 - Bust 351 Via... Read more →

New Videos - April 2016

Over the last month we have published videos discussing several of our situational charts along with IRS Form 8938, linked to below. Rev. Rul. 72-420 - Conversion of NV to BV Rev. Rul. 73-2 - Section 304/351 Overlap Rev. Rul. 75-521 - Stock Purchase & Liquidation - 332 Rev. Rul. 76-192 - CFC Created to Avoid Section 956 Rev. Rul. 75-383 - Inbound D Reorganization Form 8938, Statement of Specified Foreign Financial Assets Rev. Rul.... 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 →

New Videos - February 2016

Over the last month we have published videos discussing several of our situational charts, linked to below. B Reorganization Rev. Rul. 56-613 - Failed B Reorg - Indirect Control Rev. Rul. 70-253 - Unreimbursed Partnership Expenses Rev. Rul. 70-305 - Subsidiary Purch. & Sale of Parent Stock Rev. Rul. 59-296 - Upstream Merger of Insolvent Subsidiary Rev. Rul. 69-93 - Real Estate Deposit Taxable at Closing Rev. Rul. 71-141 - Sec. 902 Deemed Paid Credit... Read more →

Charts of Examples in Rev. Proc. 91-55: Form 5472 & Direct and Ultimate Indirect 25% Shareholders

Form 5472 is used to provide information required under Code §§6038A and 6038C when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party. A reporting corporation is either a U.S. corporation that is 25% foreign owned or a foreign corporation that is engaged in a U.S. trade or business. The reportable transactions are essentially related party transactions. Consequently, Form 5472 is an important tool in IRS... 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 →

Charts of 704(c) Traditional Method & Trad. Meth. With Curative Allocations

The I.R.S. recently published Notice 2015-54, which announced that it intends to issue regulations under Code §721(c) to ensure that, when a U.S. person transfers certain property to a partnership that has foreign partners related to the transferor, income or gain attributable to the property will be taken into account by the transferor either immediately or periodically. Treas. Reg. §1.704-3(a)(1) provides that the purpose of Code §704(c) is to prevent the shifting of tax consequences... Read more →

Charts of Examples in Code §6038A Regulations: Form 5472 Reporting Requirements

Form 5472 is used to provide information required under Code §§6038A and 6038C when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party. The reportable transactions are essentially related party transactions. Consequently, Form 5472 is an important tool in IRS audits relating to transfer pricing and Code §482. See IRM §4.61.3.4.1. Treas. Reg. §1.6038A-1(m) provides 7 examples that apply the Form 5472 reporting requirement rules. We... Read more →

Application of PFIC Look-Through Rules to Foreign Corporation with U.S. Subsidiaries

A passive foreign investment company (“PFIC”) is generally defined as any foreign corporation if 75 percent or more of its gross income for the taxable year consists of passive income, or 50 percent or more of its assets consists of assets that produce, or are held for the production of, passive income. Code §1297(c) contains a look-through rule that provides that if a foreign corporation owns, directly or indirectly, at least 25 percent of the... Read more →

Charts of Rev. Rul. 2015-09 & Rev. Rul. 2015-10

Last week the IRS released Rev. Rul. 2015-09 and Rev. Rul. 2015-10. In Rev. Rul. 2015-09, (1) a domestic corporation transferred all of the stock of its foreign operating subsidiary to its foreign holding company subsidiary in exchange for additional stock, (2) the foreign operating subsidiary and three foreign subsidiaries of the foreign holding company transferred substantially all of their assets to a newly-formed foreign subsidiary of the foreign holding company in exchange for stock... Read more →

Charts of Examples in Notice 2014-52

UPDATE - 11/1/16: Notice 2014-52 was made obsolete by T.D. 9761. See our blog post Over 50 New Situational Charts – Code §7874 Regulation Examples. On September 22, 2014, the IRS released Notice 2014-52. The notice announced that regulations will be issued under Code §§304(b)(5)(B), 367, 956(e), 7701(l), and 7874 to target corporate inversions. In summary, the notice aims to: Prevent inverted companies from accessing a foreign subsidiary’s earnings while deferring U.S. tax through the... Read more →

McLaulin – Failed Spin-Off (Situational Chart)

In McLaulin v. Commr., 276 F.3d 1269 (11th Cir. 2001), a parent corporation acquired control of a subsidiary corporation within the 5 year window specified in Code §355(b)(2)(D), by virtue of the subsidiary corporation's redemption of the stock of another shareholder. The other shareholder’s interest in the subsidiary before the redemption exceeded 20%. Gain was recognized on the redemption and the active business requirement of Code §355(a)(1)(C) was not met. Below is a chart of... Read more →

Chart of PLR With Outbound 332 Liquidation

Last year we blogged about PLR 201348011, where a U.S. corporation was not required to recognize gain on the distribution of its assets in liquidation to its foreign parent, except with respect to gain attributable to intangibles described in Code §936(h)(3)(B). The distributed property will continue to be used in a U.S. trade or business for ten years after the liquidation. Code §367(e)(2) and Treas. Reg. §1.367(e)-2(b)(2)(i). We have created a situational chart of PLR... Read more →

Chart of PLR 201432002: No Inversion as a Result of an F Reorganization & an IPO

Last week the IRS released PLR 201432002, where it applied the anti-inversion rules of Code §7874. The IRS ruled that a newly formed foreign corporation was not a surrogate foreign corporation (i.e., there was no inversion) under Code §7874 where it acquired a U.S. corporation from a foreign corporation in a Code §368(a)(1)(F) reorganization that was followed by a private placement and an IPO. The shares of the new foreign corporation were excluded from the... 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 →

Chart of CCA 201420017: Code §956: Funneling of Loan through One CFC Partner is Disregarded

Last week the IRS released Chief Counsel Advice 201420017. The IRS addressed the issue of a foreign partnership loaning money to one of its partners, a controlled foreign coporation ("CFC"), and the CFC partner loaning the amount to its U.S. Parent. U.S. Parent indirectly wholly owned CFC Partner 1 and CFC Partners. DE 1, a disregarded entity of FPS, a foreign partnership, made a loan of cash to CFC Partner 1. CFC Partner 1 then... Read more →

Chart of PLR 201411006 - Combination of Two Consolidated Groups Owned by Foreign Parent

Last week the IRS published PLR 201411006, where a foreign parent operated two different consolidated groups in the U.S. and proposed a series of transactions which would combine the two consolidated groups into one. The IRS applied the allocation of basis rules under Code §358 to the transaction. One of the first transactions involved making entity classification ("check-the-box") elections for the foreign holding corporations to treat them as disregarded entities, which would trigger a deemed... Read more →

Chart of Central de Gas de Chihuahua

Below is a chart of Central de Gas de Chihuahua v. Commissioner, 102 T.C. 515 (1994). The Tax Court held that the Code §482 adjustment made by the IRS was appropriate where one Mexican corporation, Central Gas, allowed a related Mexican corporation the rent-free use of tractors which were used in the U.S. The Code §482 adjustment created deemed rental payments to Central Gas which were U.S. source income. The chart can be viewed as... Read more →

Charts of Examples in §1361 Regulations: Termination of QSub Elections

Below are five new situational charts of examples found in Treas. Reg. §1.1361-5(a)(4). The examples apply the QSub requirements to five different situations and illustrate when a QSub election may be terminated. Images of the charts are shown below and links to PDFs of the charts are also available: Treas. Reg. §1.1361-5(a)(4) Example 1, Treas. Reg. §1.1361-5(a)(4) Example 2, Treas. Reg. §1.1361-5(a)(4) Example 3, Treas. Reg. §1.1361-5(a)(4) Example 4, Treas. Reg. §1.1361-5(a)(4) Example 5. We... Read more →