International Tax Blog

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 →

Belize IBC Selling Through Amazon FBA

Is it a good idea to set up a Belize IBC to sell products to U.S. customers thru Amazon FBA? Perhaps not. Let’s assume the situation is as follows: An individual (let’s call her Jane) resides in a foreign country --- say, for example, Australia. Jane is not a U.S. citizen or a U.S. tax resident. Jane decides she wants to sell products to U.S. customers where the products are manufactured in China and sold... Read more →

Tax Court Declines to Follow Rev. Rul. 91-32

Last week, the Tax Court released an important opinion in Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Commissioner, 149 T.C. No. 3, where the court declined to follow Rev. Rul. 91-32. For more than 25 years the IRS has maintained that gain on a foreign partner’s disposition of an interest in a partnership that conducts business in the U.S. is subject to U.S. tax. To arrive at this conclusion, the IRS applied the... Read more →

5 New Tax Charts

Today we added 5 new situational charts to andrewmitchel.com (listed in topical order). View these charts and hundreds of other free charts at andrewmitchel.com (listed in alpha-numeric order). Reg. 1.987-2(c)(10), Example 1 (Section 987: Disregarded Interbranch Transaction) Reg. 1.6038A-2(b)(9), Example 1 (5472 Reporting for U.S. Disregarded Entity) Reg. 1.6038A-2(b)(9), Example 2 (5472 Reporting for Transactions Between U.S. Disregarded Entities) PLR 9612017 (Gain on Sale of S Corporations Was Foreign Source Income) PLR 200620016 (Breach of... Read more →

Failures to Adjust for Inflation

If Congress pursues tax reform this year, it should consider allowing inflation adjustments for the items discussed below. Each year, the IRS publishes inflation adjustments that modify the tax law as originally enacted. We regularly post about the inflation adjustments in the international tax arena. However, there are some significant values in the international tax area that are not adjusted for inflation. In one case, the value has remained unchanged for over eighty years. FBAR... 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 →

15 New Tax Charts

Today we added 15 new situational charts to andrewmitchel.com dealing with a variety of topics. Am. Metallurgical Coal Co. v. Commr. T.C. Memo 2016-139: Transfer Was For Equity And Not For Debt; Post Transfer Payments Were Dividends In Re DeCoro USA Ltd U.S. Bankruptcy Court, M.D.N.C., Case No. 09-10846C-11G: Inbound Furniture Sales: Sales Comm. Model vs. Distributor Model Revenue Ruling 67-202: Contribution & Liquidation Was An Asset Reorganization & Section 269 Did Not Apply Revenue... Read more →

Updated IRS Practice Units by Topic

Recently, the IRS published 5 new International Practice Units (“IPUs”) on its website. We have updated our resource page that categorizes the IPUs by topic. The new IPUs include: Employee Share of Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad Self-Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad Portfolio Debt Exemption – Requirements and Exceptions Source of Income for Nonresident Alien Individuals Identifying Foreign Goodwill or Going Concern Read more →

Source of Income When Business Is Begun In One Country And Ended In Another

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: The question where an income is earned is always a matter of doubt when the business is begun in one country and ended in another. Barclay & Co. v. Edwards, 267 U.S. 442 (1924). In this case, the Supreme Court held that it was not... 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 →

International PLRs of Note for the 46th and 47th week of 2014

Recently the IRS published the following Chief Counsel Advice relating to international taxation. CCA 201446020 - Loans were made from CFC1 to a lower tier CFC with limited earnings and profits ("E&P"). The lower tier CFC then loaned the cash to the U.S. parent. The U.S. parent claimed that the Code §956 inclusions were limited to the E&P of the lower tier CFC. The IRS applied Treas. Reg. §1.956-1T(b)(4) and argued that one of the... Read more →

New Tax Quiz – Sourcing of Income 2

Today we added a new tax quiz to our sister website, Tax-Charts.com. The quiz added today deals with Code §861 sourcing of income. You can study this material on the study page and you can test yourself on this topic using a matching quiz, a multiple choice quiz, or using flashcards. Read more →

New Tax Case Quizzes

Today we added some new quizzes to our sister website, Tax-Charts.com. The quizzes are still a bit of a work-in-process, but if you want to test your tax knowledge, check them out at Quizzes. The quizzes added today are all tax cases dealing with the following topics: Constructive Dividends Fixed, Determinable, Annual, Periodical (FDAP) Income Foreign Earned Income Exclusion (FEIE) Separate Entity Doctrine Sourcing of Income Timing Items Timing of Sale Who Owns Property We... Read more →

Free Simplified Section 351 Exchange Flowchart

Today our sister website, Tax-Charts.com, published a free flowchart regarding the requirements for a “tax-free” exchange under Code §351. The flowchart is a simplified version of the previously published (and also free) Code §351 flowchart. The simplified version addresses the three primary requirements under Code §351 (transfer of property, in exchange for stock, and control) in an abbreviated manner. Visit Tax-Charts.com to access the Code §351 exchange flowchart, to view other free tax flowcharts, or... Read more →

International PLRs for the 43rd week of 2013

This week the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201343011 - Late IC DISC election. Form 4876-A, Code §992(b)(1)(A). PLR 201343014 - Late Canadian registered retirement savings plan ("RRSP") deferral elections. Form 8891. Rev. Proc. 2002-23. PLR 201343017 - Late Canadian registered retirement savings plan ("RRSP") deferral elections. Form 8891. Rev. Proc. 2002-23. CCA 201343019 - A Cypriot holding corporation qualifies for benefits under the... Read more →

International PLRs & CCA of the 11th week of 2013

Last week the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201311001 - Consent was granted to change methods for measuring and timing and identifying employee stock options, restricted stock units, and performance-based restricted stock units pursuant to Treas. Reg. §1.482-7(d)(3)(iii)(C) for purposes of determining the amount the taxpayer must include in its cost sharing arrangement as intangible development costs. PLR 201311004 - The generation-skipping transfer tax... Read more →

International PLRs / CCAs of the 5th week of 2012

Today the IRS published the following Chief Counsel Advice relating to international taxation: CCA 201205007: Credit card interest income earned by U.S. citizens and resident alien customers living outside the U.S. was foreign source income. The CCA relied upon the substantial presence test to determine U.S. or foreign residency. In addition, ATM fees earned related to ATM transactions located outside the U.S. were considered income from services that were performed in the U.S. and were... Read more →

Goosen v. Commr. - Golfer Endorsement Fees

In a recent Tax Court case, 136 T.C. No. 27 (2011), the court was asked to determine the U.S. taxation of certain endorsement fees and bonuses received by a professional golfer --- Retief Goosen (a.k.a. the “Iceman”). Goosen received golf tournament prize winnings as well as on-course and off-course endorsement fees. For U.K. tax purposes, Goosen’s income was paid to two corporations in which he entered into employment agreements. A portion of this income was... 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 →

Sourcing By Analogy

Code §§ 861, 862, and 863 provide rules for determining whether a particular class of income is considered U.S. source income or foreign source income. Code §§ 861(a)(1) through (a)(7) provide rules as to when specific classes of income are sourced within the U.S. Code § 862(a) is a parallel section providing when those same classes of income are sourced outside the U.S. The classes of income specified in Code §§ 861 and 862 include... Read more →

Guarantee Fees Analogized as Services

Yesterday the Tax Court published Container Corp. v. Commissioner, 134 T.C. No. 5 (2010). This decision held that guarantee fees paid by a U.S. subsidiary of a Mexican parent were not U.S. source income, and therefore were not subject to U.S. withholding taxes of 30%. Code § 881 imposes a 30% tax on “fixed or determinable annual or periodical” (“FDAP”) income received by foreign corporations from sources within the United States. The question presented was... Read more →

Sourcing Rules for Telecoms’ International Communications Income

Telecommunication companies often earn several different types of income. The Internal Revenue Code and the regulations provide special sourcing rules for “international communications income.” Code § 863(e)(2) defines international communications income as income derived from the transmission of communications or data between the United States and a foreign country (or possession of the United States). General Source Rules Code § 863(e)(1)(A) provides that any international communications income of a United States person is sourced 50... Read more →