Demystifying the Form 1118 Part 6. Schedule F-1 Determining the Tax Consequences of Dividends from First-Tier Foreign Corporation and Inclusions of the Earnings of a First or Lower Tier Foreign Corporation Prior to Tax Reform

Demystifying the Form 1118 Part 6. Schedule F-1 Determining the Tax Consequences of Dividends from First-Tier Foreign Corporation and Inclusions of the Earnings of a First or Lower Tier Foreign Corporation Prior to Tax Reform

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the sixth of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule F-1Schedule F-1 is designed to figure the tax deemed paid by a domestic corporation for first-tier corporation and inclusions of earnings from a first or lower tier foreign corporation prior to the Tax Cuts and Jobs Act of 2018. Schedule F-1 is applicable to dividends or inclusions…
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Demystifying the Form 1118 Part 4. Schedule D Foreign Tax Credits Associated with GILTI Inclusions

Demystifying the Form 1118 Part 4. Schedule D Foreign Tax Credits Associated with GILTI Inclusions

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the fourth of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule DSchedule D is designed to report foreign taxes deemed paid by a domestic corporation under Section 960(d) with respect to inclusions under the global intangible low-taxed income (“GILTI”) regime or Internal Revenue Code Section 951A. This schedule should only be completed with respect to Form 1118 filed…
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Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 5. Schedule E Reporting PTEPs of Tiered CFCs

Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 5. Schedule E Reporting PTEPs of Tiered CFCs

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the fifth of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule ESchedule E is designed to report taxes deemed paid by the domestic corporation under Section 960(b) with respect to previously taxed earnings and profits (“PTEP”) distributions. Taxes reported on this schedule are with respect to foreign taxes levied on distributions of PTEP from a lower-tier foreign corporation…
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Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 3. Schedule C “Tax Deemed Paid With Respect to Section 951(a)(1) Inclusion by Domestic Corporation Filing Return (Section 960(a))”

Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 3. Schedule C “Tax Deemed Paid With Respect to Section 951(a)(1) Inclusion by Domestic Corporation Filing Return (Section 960(a))”

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the third of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule CSchedule C is utilized to report taxes paid by the domestic corporation under Section 960(a) with respect to Section 951(a) subpart F inclusions.  inclusions under Section 951(a)(1). However, Schedule C should not be utilized to report 965 inclusions.Column 1a. Name of Foreign CorporationFor column 1a, the preparer…
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Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 2. Schedule B “Foreign Tax Credit”

Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 2. Schedule B “Foreign Tax Credit”

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the second of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule BSchedule B is utilized to report foreign taxes paid, accrued, or deemed paid for the taxable year. All transactions on Schedule B must be reported in U.S. dollars. If the corporation must convert from foreign currency, attach a schedule showing the amounts in foreign currency and exchange…
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Reporting Capital Gains

Reporting Capital Gains

Tax Law
When you sell a capital asset for a profit, you will need to report those capital gains on your taxes. This can include real property, investments, and more. There will be a different tax rate depending on whether the capital gain was short-term (you owned the asset less than one year) or long-term, and it is important to report your gains in a proper manner to avoid any unnecessary losses or penalties. You should not hesitate to seek help from an experienced tax lawyer in San Francisco. There are different forms you might receive for tax purposes, depending on the type of capital asset you earned income from. These can include: Form 1099-B, which notes gains from investmentsForm 1099-S, which notes gains from selling real propertySchedule K-1, which notes gains…
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Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 1. Schedule A “Income or (Loss) Before Adjustment”

Demystifying the Form 1118 Foreign Tax Credit- Corporations Part 1. Schedule A “Income or (Loss) Before Adjustment”

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the first of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Income Classification Lines a, b, and cThe Form 1118 begins by asking the preparer to compute a separate foreign tax credit for each category of foreign source income. The preparer must complete a separate Form 1118 for each separate category of income. In order to answer the question on line…
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Great Changes to PPP Loan Forgiveness Coming A Little Late For Some Small Businesses

Great Changes to PPP Loan Forgiveness Coming A Little Late For Some Small Businesses

Tax Law
By Lynn K. Ching Good news for (some) businesses slammed by the COVID closures! The Senate recently (June 3, 2020) passed the House version of changes to the Paycheck Protection Plan (PPP) loan, which - among other changes - now allows businesses to triple the time to spend the funds, and still qualify for forgiveness of the loans. The bill is headed to President Trump, who is expected to sign it. The upcoming changes, as set forth below, will hopefully allow more businesses to qualify for PPP loan forgiveness. For others, it may be a little late. Recap of PPP The PPP loan was available to qualifying small businesses to help mitigate the financial effects of the COVID pandemic. The loan was forgivable if certain criteria were met - over…
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Demystifying the Form 5471 Part 12. Schedule H Calculating the E&P of a Controlled Foreign Corporation

Demystifying the Form 5471 Part 12. Schedule H Calculating the E&P of a Controlled Foreign Corporation

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with a foreign corporation’s current earnings and profits (“E&P”) for US tax purposes, each year certain US person with interests in foreign corporations must attach a Schedule H to IRS Form 5471 otherwise known as “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This is the 12th of a series of articles designed to provide a basic overview of Form 5471. This article is designed to supplement the IRS instructions to the Form 5471.Who Must Complete Schedule HForm 5471 and its schedules must be completed (to the extent required by each schedule) and filed by the following categories of persons:Category 1- US persons who are officers, directors or ten percent or greater shareholders in a…
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Demystifying the Form 5471 Part 11. Schedule E-1 Calculating a CFC’s E&P for Purposes of Reporting Foreign Tax Credits

Demystifying the Form 5471 Part 11. Schedule E-1 Calculating a CFC’s E&P for Purposes of Reporting Foreign Tax Credits

Tax Law
By Anthony Diosdi IntroductionJust about all Controlled Foreign Corporations (“CFCs”) generate subpart F income and/or Global Intangible Low-Taxed Income (“GILTI”). In most cases, subpart F and GILTI income become reclassified as Previously Tax Earnings and Profits (“PTEP”). Each PTEP then needs to be placed into a separate Section 904(d) category basket. In addition, each PTEP is subject to a certain set of ordering rules that clarifies how distributions of such a PTEP is treated to each CFC shareholder.The classification of PTEPs and the ordering rules are important to calculate foreign tax credits and to determine the creditability of foreign taxes allocable to each Section 904(d) basket. It is also important to determine any Section 904(a) limitation with respect to each specific basket. For example, any foreign taxes paid or accrued…
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