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Entries by Katherine Malarsky

New International Regulations Provide Additional Guidance on Tax Reform

Posted 4:30 PM by
The IRS recently issued a new set of final and proposed regulations impacting many international tax concepts introduced as part of the Tax Cuts and Jobs Act (TCJA). As a refresher, the TCJA enacted section 951A, often known as Global Intangible Low-Taxed Income (GILTI), and requires a U.S. shareholder of a Controlled Foreign Corporation (CFC) to include certain income earned by a CFC in taxable income annually. The shareholder’s GILTI inclusion is the sum of the shareholder’s aggregate tested income in excess of tested loss, with certain modifications, calculated based on the proportional interest in all CFCs in which the shareholder held during the tax year.
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Virtual Currency Update – Some Answers With Many More Questions

Posted 8:00 PM by
The income tax treatment of virtual currency (also known as cryptocurrency) transactions continues to evolve. There remains a great deal of uncertainty in the treatment, computations, and reporting of virtual currency transactions, despite the recent activity and guidance from the IRS.
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COVID-19 Tax Relief for Nonresident Alien Individuals and U.S. Persons Living Abroad

Posted 7:30 PM by
The Internal Revenue Service (IRS) has provided guidance in Revenue Procedure 2020-20 related to nonresident alien individuals and their ability to claim a medical condition travel exception to the substantial presence test. This is critically important because the substantial presence test controls how nonresident aliens are taxed (as either a resident or nonresident of the United States) in many situations. Additionally, the IRS has provided guidance in Revenue Procedure 2020-27 to U.S. persons living abroad related to the physical presence test and the impact on the foreign earned income exclusion calculation.
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New Requirements for Tracking International Affiliates and Rental Real Estate: BE-10 Report

Posted 5:45 PM by
The rules related to BE-10 filing requirements have changed this year and will require additional people (“Reporters”) to complete this informational form. Every five years, the Bureau of Economic Analysis (BEA), part of the U.S. Department of Commerce, conducts a survey to analyze the extent of U.S. persons’ direct investment abroad. Specifically, this year’s filing change relates to U.S. persons that own foreign affiliates and/or foreign rental real estate being required to file, regardless of being notified.
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The CARES Act and Net Operating Losses: International Tax Considerations

Posted 12:25 PM by
On April 9, 2020, the Internal Revenue Service (IRS) issued Revenue Procedure 2020-24. The purpose of the Revenue Procedure is to provide guidance related to Section 172(b)(1)(D) of the Internal Revenue Code, which was created as a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Specifically, Section 172(b)(1)(D) allows a carryback of any net operating loss (NOL) arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021, to each of the five years preceding the year in which the NOL was created. Taxpayers will carryback the relevant NOL to the earliest taxable year in the carryback period, carrying forward any unused amounts to each succeeding tax year.
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Complying With the Often Misunderstood International Boycott Reporting Requirements

Posted 3:45 PM by
The Internal Revenue Code, while primarily used to generate tax revenue for the government, is often used to incentivize or penalize various U.S. policy decisions. Section 999 is one such section that is driven by broader U.S. policy goals.
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Determining the Category of Filer for Form 5471 With Respect to Ownership of Foreign Corporations

Posted 5:30 PM by
The Tax Cuts and Jobs Act (“TCJA”) that was passed at the end of 2017 was meant to simplify the tax code. However, in the international tax realm, the complexity has only increased. This is certainly true of the revised form and instructions for Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, as of December 12, 2018 for the 2018 tax filing season. These revisions significantly change the form, and the instructions expand the categories of filers for this form.
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The Increased Importance of Income Sourcing in a Post-Tax Reform World

Posted 8:00 PM by
The Tax Cuts and Jobs Act of 2017 (TCJA), signed into law in late 2017, included significant changes to the tax environment in the United States. One of the largest changes was the addition of the qualified business income (QBI) deduction. The QBI deduction allows for a deduction of up to 20 percent of the qualified business income from partnerships, limited liability companies (LLCs), S corporations, trusts, estates, and sole proprietorships. Learn more about the QBI deduction.
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New GILTI Rules Target U.S. Shareholders of Controlled Foreign Corporations

Posted 2:30 PM by
As a general rule, the earnings of a foreign corporation are not subject to U.S. taxation until such earnings are distributed as dividends. The Subpart F rules have long been in place to subject the earnings of a controlled foreign corporation (CFC) to U.S. taxation whether or not such earnings are actually distributed. The tax reform legislation passed in Dec. 2017 imposed an additional anti-deferral rule referred to as GILTI (Global Intangible Low-Taxed Income). The new GILTI inclusion rules function in a manner similar to the existing Subpart F regime.
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Litigation Activity Keeps Spotlight on Reporting of Foreign Financial Accounts

Posted 12:00 PM by
With penalties including monetary fines and possible jail time, the Internal Revenue Service (IRS) and Department of the Treasury have shown how seriously they treat violations related to foreign financial account reporting. Considering such tough penalties, it is critical to understand who is required to file, what information is needed, and how recent cases could impact you.
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