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Controlled Foreign Corporation

IRS issues final regs eliminating & modifying exceptions to coordination rule

IRS issues final regs eliminating & modifying exceptions to coordination rule

Reg. § 1.367(a)-3; Reg. § 1.367(a)-6; Reg. § 1.367(a)-6T; Reg. § 1.1248(f)-3 ; Reg. § 1.6038B-1 TD 9760, Indirect Stock Transfers and the Coordination Rule Exceptions; Transfers of Stock or Securities in Outbound Asset Reorganizations (Mar. 18, 2016). IRS has issued final regs, generally adopting temporary regs issued in 2013, that eliminate an exception to […]

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IRS discusses application of residual profit-split method to outbound IP transactions

IRS discusses application of residual profit-split method to outbound IP transactions

Residual Profit Split Method – Outbound (ISO/PUO/P_1.7_04(2014)) (Mar. 7, 2016). IRS has released a new international practice unit (IPU) illustrating the application of a specific transfer pricing method, the residual profit-split method (RPSM), to a transaction where a U.S. parent corporation (USP) licenses certain intangible property (IP) to its controlled foreign corporation (CFC) in exchange […]

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IRS rejects bifurcation of CFC income between sales and services for subpart F purposes

IRS rejects bifurcation of CFC income between sales and services for subpart F purposes

Legal Advice Issued by Field Attorneys 20153301F In a heavily redacted Legal Advice Issued by Field Attorneys (LAFA), IRS has characterized the entire amount of an intercompany referral fee derived by certain controlled foreign corporations (CFCs) as subpart F income—specifically, foreign base company sales income.It held that the taxpayer erred in treating any portion of […]

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Proposed Regs Detail When Partnerships Transactions Result in U.S. Property for CFC

Proposed Regs Detail When Partnerships Transactions Result in U.S. Property for CFC

Preamble to Prop Reg 09/01/2015, Prop Reg § 1.954-2, Prop Reg § 1.956-1, Prop Reg § 1.956-2 , Prop Reg § 1.956-3, Prop Reg § 1.956-4 IRS has issued proposed regs that would provide rules on the treatment as U.S. property for property held by a controlled foreign corporation (CFC) in connection with certain transactions […]

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IRS issues guidance to its examiners on auditing transactions under sections 367(b) and 482

IRS issues guidance to its examiners on auditing transactions under sections 367(b) and 482

IRS has released two international practice units (IPUs) providing an overview of foreign-to-foreign transactions under Code Sec. 367(b) and transfer pricing under Code Sec. 482. IPUs generally identify strategic areas of importance to IRS and can provide insights as to how IRS examiners may audit a particular issue or transaction. Background—foreign-to-foreign transactions under 367(b). With […]

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Temporary Regs Expand Application of Sec. 956 Anti-Avoidance Rule to Partnerships

Temporary Regs Expand Application of Sec. 956 Anti-Avoidance Rule to Partnerships

T.D. 9733, 09/01/2015; Reg. § 1.954-2T, Reg. § 1.956-1T, Reg. § 1.954-2Reg. § 1.956-1 IRS has issued temporary regs that, by expanding the anti-avoidance rule in Reg. § 1.956-1T(b)(4), treat property indirectly held by a controlled foreign corporation (CFC) in connection with certain transactions involving partnerships as “U.S. property”. The temporary regs also provide guidance […]

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IRS, issues, guidance, to its, examiners, on subpart, F, audits

IRS, issues, guidance, to its, examiners, on subpart, F, audits

IRS has released three new international practice units (IPUs) providing guidance to IRS agents on the audit of certain structures and transactions that may generate subpart F income. Noting that the subpart F and transfer pricing rules are “not mutually exclusive,” IRS directs its examiners to request the following additional resources: organizational charts, steps of […]

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Subsequent Stock Transfer To A Partnership Didn’t Defeat Tax-Free Treatment Under Code Sec. 351(A)

Subsequent Stock Transfer To A Partnership Didn’t Defeat Tax-Free Treatment Under Code Sec. 351(A)

PLR 201506008   IRS ruled privately that when stock is acquired in a Code Sec. 351(a) exchange and is subsequently transferred to a partnership as part of the same transaction, the subsequent transfer will not cause the first exchange to fail to qualify as a nontaxable transfer to a controlled corporation under Code Sec. 351(a). […]

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Determining if CFC’s Foreign Sales Branch is Treated as Separate Corporation

Determining if CFC’s Foreign Sales Branch is Treated as Separate Corporation

Legal Advice Issued by Associate Chief Counsel 2015-002   In a generic legal advice memorandum, the Associate Chief Counsel (International) has illustrated the proper application of Code Sec. 954(d)(2), which provides special rules for the treatment of a foreign branch of a controlled foreign corporation (CFC). As illustrated in the memorandum, the foreign sales branch […]

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Determining if CFC’s foreign sales branch is treated as separate corporation

Determining if CFC’s foreign sales branch is treated as separate corporation

Legal Advice Issued by Associate Chief Counsel 2015-002 In a generic legal advice memorandum, the Associate Chief Counsel (International) has illustrated the proper application of Code Sec. 954(d)(2), which provides special rules for the treatment of a foreign branch of a controlled foreign corporation (CFC). As illustrated in the memorandum, the foreign sales branch of […]

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Short-Term Obligation Exception Didn’t Apply To CFC’s Loans To U.S. Parent

Short-Term Obligation Exception Didn’t Apply To CFC’s Loans To U.S. Parent

Chief Counsel Advice 201516064 In Chief Counsel Advice (CCA), IRS has concluded that the short-term obligation exception to the controlled foreign corporation (CFC) U.S. property rules, which is provided by Notice 88-108, does not apply to any obligation owned by a CFC unless all obligations held during the tax year by the CFC that would […]

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U.S. manufacturer subject to multiple agency investigations over Swiss tax strategy

U.S. manufacturer subject to multiple agency investigations over Swiss tax strategy

In a form filed with the Securities and Exchange Commission (SEC), Caterpillar Inc., which last year was the subject of a Senate hearing on multinationals shifting profits out of the U.S., revealed that numerous investigations by the Justice Department, IRS, and SEC were ongoing with respect to its tax strategies and overall business structure.According to […]

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IRS Disallows U.S. Parent’s Attempt To Claim FTC For Pre-Acquisition Taxes Paid By CFC

IRS Disallows U.S. Parent’s Attempt To Claim FTC For Pre-Acquisition Taxes Paid By CFC

Chief Counsel Advice 201444039 In Chief Counsel Advice (CCA), IRS concluded that a U.S. parent could not include foreign income taxes of a foreign subsidiary, which were paid after the subsidiary became a controlled foreign corporation (CFC) but accrued prior to that time, in the post-’86 foreign income tax pool of the subsidiary. IRS determined […]

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Tax owed by U.S. shareholder may be increased by interest owed to CFC

Tax owed by U.S. shareholder may be increased by interest owed to CFC

Chief Counsel Advice 201436047 In Chief Counsel Advice (CCA), IRS has said that where a controlled foreign corporation (CFC) holds the debt obligation of a U.S. shareholder of the CFC, interest that has accrued and is unpaid on the obligation is U.S. property under Code Sec. 956(c). As explained in this article, such accrued interest […]

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U.S. parent’s attempt to claim FTC for pre-acquisition taxes paid by CFC fails

U.S. parent’s attempt to claim FTC for pre-acquisition taxes paid by CFC fails

Chief Counsel Advice 201444039 In Chief Counsel Advice (CCA), IRS concluded that a U.S. parent could not include foreign income taxes of a foreign subsidiary, which were paid after the subsidiary became a controlled foreign corporation (CFC) but accrued prior to that time, in the post-’86 foreign income tax pool of the subsidiary. IRS determined […]

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Convoluted loan scheme didn’t avoid CFC investment-in-U.S.-property rule

Convoluted loan scheme didn’t avoid CFC investment-in-U.S.-property rule

Chief Counsel Advice 201420017. In Chief Counsel Advice, IRS has rejected a scheme to reduce a U.S. shareholder/parent corporation’s investment in U.S. property under the controlled foreign corporation (CFC) rules. The scheme featured an entity owned by several of the parent’s CFCs making a loan to one of the CFCs which, in turn, made a […]

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Proposed Regulations Would Change Research Credit Calculations For Controlled Group Transactions

Proposed Regulations Would Change Research Credit Calculations For Controlled Group Transactions

IRS has issued proposed regulations that would: a) provide an exception to the general treatment of gross receipts of a foreign corporation for purposes of the calculation of a controlled group’s research credit base amount, and b) require that controlled group base amount calculations reflect the law in effect for the year that the research […]

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Stock redemption reduced foreign corporation’s post-’86 foreign income taxes

Stock redemption reduced foreign corporation’s post-’86 foreign income taxes

In Legal Advice Issued by Chief Counsel, 2013-006, IRS has concluded that where a minority shareholder’s stock in a controlled foreign corporation (CFC) was redeemed under Code Sec. 302(a), and as a consequence, the post-’86 undistributed earnings of the foreign corporation were reduced under Code Sec. 312(a), a corresponding reduction of the foreign corporation’s post-’86 […]

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IRS clarifies definition of “production activities” under CFC rules

IRS clarifies definition of “production activities” under CFC rules

In an IRS Private Letter Ruling, PLR 201340010, IRS has privately ruled that the fact that an activity is a “growing activity” doesn’t preclude it from being considered a “production activity” for purposes of the manufacturing exception to the definition of foreign base company income sales income (FBCSI) under the controlled foreign corporation (CFC) rules. […]

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Ireland announces plans to crack down on “stateless” multinational corporations

Ireland announces plans to crack down on “stateless” multinational corporations

Irish Finance Minister Michael Noonan has announced the country’s plans to “ensure that Irish registered companies cannot be “stateless” in terms of their place of tax residency.” This refers to tax arrangements used by certain multinationals where, by taking advantage of differences between countries’ laws pertaining to residency for tax purposes, the corporation claims to […]

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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