Tag: Transition tax

 By Anthony Diosdi As a result of the Section 965 “transition tax,” few controlled foreign corporations (“CFCs”) have untaxed offshore earnings and profits (“E&P”). With that said, there are still a number of strategies available to CFCs to defer offshore E&P. In certain cases, these strategies leave CFC shareholders with large pools of untaxed offshore E&P. This article will discuss how untaxed offshore E&Ps is taxed when a CFC shareholder disposes of such stock. Under Section 1248(a) of the Internal Revenue Code, gain recognized on a U.S. shareholder’s disposition of stock in a CFC is treated as dividend income to the extent of relevant accumulated E&P while the stock was held. When a corporation sells shares of a CFC, the conversion of gain into a dividend typically results in an…

By Anthony Diosdi With the recent downturn in the economy, one of the most frequent questions my office receives is whether or not the Internal Revenue Service (“IRS”) will consider compromising a 965 repatriation or transition tax assessment. On March 23, 2020, the IRS Director of Collection Policy issued a memorandum entitled “Interim Guidance on Offers in Compromise Involving Internal Revenue Code (IRC) Section 965 (Repatriation Tax or Transition Tax).” This memorandum not only verified that the IRS may consider compromising a 965 tax liability through an Offer in Compromise, it also provided valuable guidance regarding taxpayers who elected to defer payment of the 965 tax liability through either a Section 965(h) or 965(i) election.An Overview of the Section 965 Repatriation or Transition TaxInternal Revenue Code Section 965 imposes a…

By Anthony Diosdi As part of the Tax Cuts and Jobs Act of 2017 (“TCJA”), Congress enacted certain “transition tax” provisions applicable to “controlled foreign corporations” (“CFC”) owned by United States persons. See Pub. L. 115-97, 131 Stat. 2054 (2017). On January 15, 2019, the Internal Revenue Service (“IRS”) and United States Department of Treasury (hereinafter “Defendants”) published final regulations to effectuate these tax provisions.Monte Silver, is the sole shareholder of Monte Silver, Ltd, a CFC incorporated in Israel. Monte Silver (hereinafter “Plaintiffs”) brought an action against the United States in the United States District Court for the District of Columbia. The case is entitled Monte Silver, et al v. Internal Revenue Service, et al. Civil No. 19-cv-247 (APM). The Plaintiffs challenged Defendant’s alleged failure, in connection with promulgating the…