The U.S. Tax Court has held that a commercial airline pilot stationed in South Korea failed both the “tax home” and the “bona fide residence” tests that determine whether a taxpayer qualifies for the foreign earned income exclusion.
The pilot flew airplanes for Korean Air Lines (KAL) in 2011 and 2012. KAL considered him to be stationed in Incheon, Korea, which meant that Incheon was the airport he most frequently operated from. (more…)
The U.S. District Court for the Eastern District of Pennsylvania denied summary judgment to both the IRS and a taxpayer with regard to his Swiss bank account. In the case, the IRS slapped the maximum penalty on the taxpayer for willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR).
The Court concluded that whether the taxpayer willfully failed to submit an accurate FBAR was an inherently factual question and that genuine disputes existed as to what the taxpayer knew about his reporting requirements and when he knew it.
The Organization for Economic Co-operation and Development (OECD) released the key document that forms the basis of the peer review of the base erosion and profit shifting (BEPS) minimum standard on preventing inappropriate treaty shopping.
The Tax Court ruled that certain payments received by a U.S. citizen working abroad from a foreign taxing authority were in fact refunds under the Internal Revenue Code.
Facts of the case
A U.S. citizen worked for the London office of Goldman Sachs and received employee compensation from which United Kingdom income tax was withheld. The taxpayer filed both U.S. and UK income tax returns for each year at issue. On a timely filed U.S. return for each year, she claimed a foreign tax credit in an amount equivalent to the UK tax withheld by her employer.
The Congressional Budget Office (CBO) updated its report comparing the corporate income tax rates of the U.S. and other G20 countries.
The report examines not only the statutory top rates, of which the U.S. has the highest, but also provides information on the average and effective corporate tax rates, including insight as to how certain corporate decision-making is influenced by each. (more…)
The IRS Large Business and International (LB&I) division has released its widely anticipated new audit strategy known as “campaigns.”
The LB&I is moving toward issue-based examinations. “This approach makes use of IRS knowledge and deploys the right resources to address those issues,” the IRS stated.
In a further indication of the IRS’s continued focus on international tax issues, the tax agency updated an International Practice Unit (IPU) summarizing the calculation and recapture of foreign and domestic losses and their impact on the foreign tax credit.
President-elect Donald Trump’s election win moves Apple, Pfizer, Microsoft and other big U.S. corporations much closer than they have been in years to winning a big tax break on approximately $2.6 trillion in foreign profits.
This article explains the mechanics of taxing foreign-source income, the 2004 repatriation holiday, proposals for another holiday, and the prospects of enacting a repatriation holiday under the Republican-controlled government.
U.S. corporations are taxed on a worldwide basis, meaning that they’re generally taxed on income that’s earned within and outside of the U.S. subject to certain exceptions; income earned outside the U.S. isn’t subject to U.S. tax until it’s brought back to the United States — in other words, until it’s repatriated. At that point, it’s included in the corporation’s gross income. To mitigate double taxation, U.S. corporations may elect to either deduct or claim a foreign tax credit for the foreign income taxes that were paid or accrued on the foreign earnings.
Most developed countries, on the other hand, have adopted a territorial tax system. Such countries generally only tax income derived from sources within their borders. (more…)
The IRS said it plans to modify the regs relating to certain triangular reorganizations involving foreign corporations.
Specifically, in Notice 2016-73, the tax agency announced it will alter the rules affecting the treatment of property used to acquire parent stock or securities in triangular reorganizations involving one or more foreign corporations, as well as describe the consequences to persons that receive parent stock or securities in those reorganizations. (more…)