
Facing a 965 Transition Tax Audit? Maybe a 962 Election Can Save the Day
By Anthony Diosdi In August of 2020, the Internal Revenue Service (“IRS”) launched a compliance campaign that targets the individual compliance with the Section 965 transition tax through examinations and correspondences. In October of 2020, the IRS announced it will be expanding Section 965 examinations. Our experience with Section 965 audits indicates that the IRS is focusing on the earnings and profits (“E&P”) calculations, the calculation of foreign tax credits, foreign tax pools, and transactions used to reduce E&P. It has also been our experience that a significant number of CFC shareholders facing a transition tax audit could greatly benefit by making a late 962 election. This article discusses the 965 transition tax and the possibility of making a 962 election. A Section 962 election could be a very useful…