23Jul 2020 by Pat Geddie
Top Audit Triggers of a CFC that Catch the Attention of the IRS. Part One- Calculating a Net Section 965 Tax Liability Incorrectly

Top Audit Triggers of a CFC that Catch the Attention of the IRS. Part One- Calculating a Net Section 965 Tax Liability Incorrectly

Tax Law
By Anthony Diosdi IntroductionFor those who are or will be involved in international business and investment transactions, it is important to have some basic understanding of the relevant tax laws. These series of articles are intended to warn individual shareholders of controlled foreign corporations (“CFCs”) (whether individual or corporate) of the mistakes that will likely catch the attention of the Internal Revenue Service (“IRS”) and trigger a potential costly audit.  We will begin this series by discussing the calculation of the Section 965 transition tax and why we believe it will be a target for the IRS. On December 22, 2017, Section 965 of the Internal Revenue Code was amended. As a result of the amendment, certain CFC shareholders were required to include in income an amount (a Section 965(a)…
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08Apr 2019 by Pat Geddie
The Impact of an Installment Sale and the Potential Branch Profits Tax Liability for any Foreign Corporation Doing Business in the U.S.

The Impact of an Installment Sale and the Potential Branch Profits Tax Liability for any Foreign Corporation Doing Business in the U.S.

Tax Law
By Anthony Diosdi In prior blogs, I discussed the very complex and potentially costly branch profits tax (“BPT”) provisions. Simply put, any foreign corporation that is engaged in business in the U.S. can be subject to the BPT in a particular year if the foreign corporation has effectively connected earnings and profits (“ECEP”). The potential BPT often generates an unpleasant “surprise.” This is especially the case where a foreign corporation has incurred losses in prior years and seeks to use loss carryforwards to eliminate a corporate tax liability. Generally speaking, if a domestic corporation pays a dividend to a foreign shareholder, for instance from an Asian country, a 30 percent U.S. withholding tax will be imposed and is  required to be collected at the source by the payor domestic corporation.…
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