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May 31, 2018 - Haoshen Zhong

Paying the First Installment of the 965 Tax

How to make the first section 965 installment payment

Today’s post is for individuals living abroad who file their tax returns on June 15 and who have deemed repatriation income from their foreign corporations under section 965.

Background: deemed repatriation under section 965

A quick introduction to section 965: In December of 2017, Congress passed laws that changed the US taxation of foreign income significantly. One of these laws is section 965.

There are many nuances to section 965, but here is the short version that covers what we need today: If you are a US citizen, green card holder, or other resident, or you are a US entity; and you own at least 10% of a foreign corporation, you might have a lot of income from the deemed repatriation of your share of the foreign corporations’ accumulated profits since 1986.... continue reading

Minimultinationals
May 17, 2018 - Haoshen Zhong

How a Green Card Holder Might Avoid Section 965 and GILTI

How a green card holder might avoid section 965 and GILTI with a treaty election

Today’s post is a (sort of) followup to Phil’s Friday Edition post on 2018-03-16.

Here is the 1 paragraph summary to Phil’s post: In the 1990s, the IRS adopted regulation section 301.7701(b)-7, stating that if a US resident elects income tax treaty benefits for a nonresident, then he calculates tax as a nonresident, but he remains a US resident for all other purposes of the Code. In 2008, Congress changed the Code to say that if a green card holder elects income tax treaty benefits for a nonresident, then he ceases to be a US resident.... continue reading

Minimultinationals
May 3, 2018 - Haoshen Zhong

Section 965 and Fiscal Year Foreign Corporations, Part II

Fiscal year corporations and section 965

Today’s post is a followup to the (last post), about a US citizen who owns shares of a fiscal year foreign corporation that is subject to the new deemed repatriation rule of section 965. Here is the setup:

I am a US citizen reporting on a calendar year. I have a foreign corporation with a fiscal year ending June 30. When am I subject to the repatriation tax? What is the rate of tax?

In the last post, I wrote that this corporation may be subject to section 898, which forces certain CFCs to conform to its shareholder(s) tax year.... continue reading

Minimultinationals
April 19, 2018 - Haoshen Zhong

Section 965 and Fiscal Year Foreign Corporations

*Please see the follow-up to this post here.

Fiscal year corporations and section 965

Here is one question that we saw rather often:

I am a US citizen reporting on a calendar year. I have a fiscal year corporation. When am I subject to the repatriation tax? What is the rate of tax?

This post explains why you might not have a fiscal year corporation under tax law, why a US shareholder of a fiscal year corporation (assuming it is one) takes into account income in 2018, and how the participation exemption works for shareholders of fiscal year corporations.

Background: deemed repatriation under section 965

A quick introduction to section 965: In December of 2017, Congress passed laws that changed the US taxation of foreign income significantly.... continue reading

Minimultinationals
April 5, 2018 - Haoshen Zhong

Effective Tax Rate Under Section 965 for Individuals

One question we get a lot is this:

My client is a US citizen who has to recognize deferred income from foreign corporations under the new deemed repatriation law. What is the effective tax rate?

The effective tax rate is going to depend on this client’s income and what else he has going on, so it is not particularly effective to tell you the tax rate. Instead, this post tells you how to calculate the participation exemption that applies to the deemed repatriation, so you can plug in some numbers and get the effective tax rate for each client.

Background: deemed repatriation under section 965

A quick introduction to section 965: In December of 2017, Congress passed a law that changes the US taxation of foreign income fairly significantly.... continue reading

Minimultinationals