[DOWNLOAD] "IRS Takes Controversial Approach to Characterization of Separately Stated Item of Subpart F Income" by Florida Bar Journal " eBook PDF Kindle ePub Free
eBook details
- Title: IRS Takes Controversial Approach to Characterization of Separately Stated Item of Subpart F Income
- Author : Florida Bar Journal
- Release Date : January 01, 2009
- Genre: Law,Books,Professional & Technical,
- Pages : * pages
- Size : 86 KB
Description
After several months of internal debate and discussions, the IRS recently refused to issue a private letter ruling pertaining to the ability of a constructive U.S. shareholder of a controlled foreign corporation (CFC) to make a retroactive [section] 962 election. (1) The issue was not whether the U.S. shareholder satisfied the requirements for seeking retroactive relief under the [section] 9100 regulations, as the IRS agreed that those requirements had been met. (2) Rather, the issue was whether a U.S. shareholder that constructively owns a CFC through a 100 percent owned S corporation (which, for subpart F purposes, is characterized as a single-member partnership under [section] 1373(a)) has an amount that is "included in his gross income under [s]ection 951(a)" when the partnership has such an inclusion. The IRS is of the view that, despite the unambiguous language of [section] 702(b), the clear legislative intent behind [section] 962, and analogous guidance issued by the IRS, a constructive U.S. shareholder of a CFC does not have the ability to make a [section] 962 election on the grounds that a separately stated item of [section] 951(a) income under [section] 702(a) is not equivalent to a direct inclusion of [section] 951(a) income. Stated differently, the IRS ignored the "conduit" nature of [section] 702(b) and argued that the U.S. shareholder did not have a [section] 951(a) inclusion, but instead had a [section] 702(b) inclusion of [section] 951(a) income. According to the IRS, these are two entirely different things. This article will discuss the arguments raised by the IRS and the taxpayer in connection with the ruling and consider some of the potential ramifications of the IRS position with respect to other U.S. international tax provisions.