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Foreign tax credits

District Court -IRS incorrectly disallowed foreign tax credit and foreign earned income exclusion

District Court -IRS incorrectly disallowed foreign tax credit and foreign earned income exclusion

Estate of Herrick (DC UT 3/25/2016) 117 AFTR 2d ¶ 2016-555 A district court has held that a taxpayer provided sufficient evidence of his foreign tax liability to have that liability taken into consideration for purposes of the foreign tax credit (FTC) and that he timely elected the foreign earned income exclusion (FEIE). As a […]

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Residency and presence tests for 2015 foreign income/housing exclusions waived for Burundi

Residency and presence tests for 2015 foreign income/housing exclusions waived for Burundi

Rev Proc 2016-21, 2016-14 IRB In a Revenue Procedure, IRS has waived the residency and presence tests that apply for purposes of the Code Sec. 911 foreign earned income and foreign housing cost exclusions with respect to certain U.S. individuals in Burundi due to adverse conditions in that country beginning on May 14, 2015. Background. Code […]

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Tax Court – previous IRS auditor saying taxpayer wasn’t employee didn’t affect tax but eliminated penalty

Tax Court – previous IRS auditor saying taxpayer wasn’t employee didn’t affect tax but eliminated penalty

Alfred S. Co, TC Memo 2016-19 The Tax Court has held that a taxpayer who worked under a series of personal service contracts for the U.S. Department of State was an employee of the U.S. government and thus the income he earned in the position was not foreign earned income under Code Sec. 911(a). The […]

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Federal Circuit denies rehearing in foreign tax credit refund case

Federal Circuit denies rehearing in foreign tax credit refund case

Albemarle Corp. v. U.S., (CA Fed Cir 10/22/2015) 116 AFTR 2d ¶2015-5354 The Court of Appeals for the Federal Circuit has denied a corporation’s petition for rehearing of a decision that rejected its refund claim for disputed foreign tax credits (FTCs) as time-barred. The Court, dismissing the corporation’s contrary arguments as unsupported or otherwise off […]

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Effect of “adjustments to accrued taxes” rules when FTC is computed on cash basis

Effect of “adjustments to accrued taxes” rules when FTC is computed on cash basis

Chief Counsel Advice 201534013 In Chief Counsel Advice (CCA), IRS has held that two of the three circumstances described in Code Sec. 905(c), which is entitled “Adjustments to accrued taxes” and provides rules on computing the foreign tax credit (FTC), don’t apply to taxpayers who claim FTCs on the cash basis, but the third one, […]

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Regs to be issued on U.S. person’s transfers of property to partnership with foreign partners

Regs to be issued on U.S. person’s transfers of property to partnership with foreign partners

Notice 2015-54, 2015-34 IRB In a Notice, IRS has announced that it intends to issue regs under Code Sec. 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 […]

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Court of Appeals denies STARS transaction foreign tax credits, allows interest deductions

Court of Appeals denies STARS transaction foreign tax credits, allows interest deductions

Salem Financial Inc., (CA FC 5/14/2015) 115 AFTR 2d ¶ 2015-743 The Court of Appeals for the Federal Circuit has ruled that the portion of a”structured trust advantaged repackaged securities” (STARS) transaction involving the use of a trust to generate foreign tax credits (FTCs) had no economic substance, but that the portion in which the […]

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Payment was dividend, so “withholding tax” rule meant no foreign tax credit

Payment was dividend, so “withholding tax” rule meant no foreign tax credit

Lehman Brothers Holdings, Inc., (DC NY 5/08/2015) 115 AFTR 2d ¶ 2015-731   A district court has ruled that, under the U.S. treaty with the United Kingdom (U.K.), a payment received by a U.S. subsidiary of Lehman Brothers (Lehman) from a U.K. Lehman subsidiary was a dividend. As a result, the Code Sec. 901(k)(1)(A)(ii) “withholding […]

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FIRPTA Amendments Proposed To Encourage Foreign Investment In U.S. Real Estate

FIRPTA Amendments Proposed To Encourage Foreign Investment In U.S. Real Estate

Two senior members of the U.S. House Ways & Means Committee, one Republican and one Democrat, have introduced amendments to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) that aim to encourage greater foreign investment in U.S. real estate. Background on FIRPTA. In December of ’80, Congress enacted FIRPTA. It greatly revised the […]

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IRS Issues Housing Cost Allowances For Those Working Abroad In High-Cost Areas In 2015

IRS Issues Housing Cost Allowances For Those Working Abroad In High-Cost Areas In 2015

Notice 2015-33, 2015-18 IRB A new Notice provides adjustments to the limitation on housing expenses under the Code Sec. 911 housing cost exclusion for specific locations for 2015. The Notice further provides that some taxpayers may elect to apply the 2015 limitation for tax years beginning in 2014. Background. A qualified individual may elect to exclude […]

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New Notice expands applicability of rules targeting foreign tax credit loophole

New Notice expands applicability of rules targeting foreign tax credit loophole

Notice 2014-45, 2014-34 IRB IRS has announced that the rules in Notice 2014-44, 2014-32 IRB, which was issued earlier this month and provided guidance relating to certain dispositions of assets following a covered asset acquisition under Code Sec. 901(m), will also apply to entity classification elections made under Reg. § 301.7701-3 that are filed on […]

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IRS closes loophole that allowed inflated foreign tax credits

IRS closes loophole that allowed inflated foreign tax credits

Notice 2014-44, 2014-32 IRB In a notice, IRS has announced that it will be issuing regs to close a loophole which taxpayers were using to avoid a provision that disallowed the foreign tax credit with respect to disposition of acquired property that has a higher basis for U.S. federal income tax purposes than for foreign […]

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Tax Court upholds jurisdiction to determine status of refunds and if deficiency procedures apply

Tax Court upholds jurisdiction to determine status of refunds and if deficiency procedures apply

In Sotiropoulos v. Commissioner, (2014) 142 TC No. 151, the Tax Court has determined that it had jurisdiction to consider whether certain payments received by a U.S. citizen working abroad from a foreign taxing authority were in fact refunds under Code Sec. 905(c)(1)(C). IRS argued that the amounts were refunds and that it had the […]

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Tax Court decides French social security taxes don’t qualify for foreign tax credit

Tax Court decides French social security taxes don’t qualify for foreign tax credit

In Eschel v. Commissioner, 142 T.C. No. 11 (2014), the Tax Court has held that U.S. citizens weren’t allowed a foreign tax credit under Code Sec. 901 for social security taxes paid to France while the taxpayers were working there for a non-American employer. The Court found that Sec. 317(b)(4) of the Social Security Amendments […]

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U.S. Senate panel to hold hearing on Caterpillar offshore taxes

U.S. Senate panel to hold hearing on Caterpillar offshore taxes

WASHINGTON (Reuters) – A U.S. Senate subcommittee known for investigating corporate tax avoidance said on Monday it will hold a hearing on April 1 to examine the offshore tax strategies of Caterpillar Inc, the world’s largest mining and construction equipment maker. Witnesses at the hearing will include officials from Caterpillar and Big Four accounting firm […]

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Working Abroad Can Have Tax Benefits – Many Americans Can Exclude Part or All of Their Income

Working Abroad Can Have Tax Benefits – Many Americans Can Exclude Part or All of Their Income

Working Abroad Can Have Tax Benefits – Many Americans Can Exclude Part or All of Their Income, as reported in the news of the WS Journal. Q:  If I move overseas and work there next year, will I still have to pay U.S. income taxes on the income I earn abroad? — R.B., New York […]

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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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Foreign Recipients of US Income Study, 2011 Tax Year

Foreign Recipients of US Income Study, 2011 Tax Year

Two tables presenting data for Tax Year 2011 from Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, are now available here. The tables include statistics for the number of returns, total income, tax withheld, income subject to withholding, income exempt from withholding, and income by category. Data are available by selected countries and […]

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IRS finalizes reg that disallows artificially-generated foreign tax credits

IRS finalizes reg that disallows artificially-generated foreign tax credits

IRS has finalized a temporary reg, T.D. 9634, 09/03/13; Reg. § 1.901-2,  that closes a loophole under which taxpayers could increase their foreign tax credit (FTC) via a “structured passive investment arrangement,” which is a highly structured arrangement that produces inappropriate FTC results. Background—Code and pre-2011 reg. Under Code Sec. 901, taxpayers can claim a […]

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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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Member CA Bar Member Orange County Bar US Tax Court Attorney