U.S. income tax laws can be challenging for U.S. citizens who live outside of the U.S. This is particularly true for airline pilots who accept jobs overseas. The recent Acone v. Commissioner, T.C. Memo. 2017-162, case addresses the challenge of determining whether an airline pilot stationed overseas qualifies for the Section 911 foreign income exclusion.…
Category: International Tax
International Tax
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Intercompany Receivable Results in Section 956 Inclusion for U.S. Corp.
The Subpart F rules can result in foreign profits being subject to tax in the U.S. In the recent Crestek v. Commissioner, 49 T.C. 5 (2017), the court addresses unpaid advances a controlled foreign corporation made to its U.S. parent. The case shows how easy it is for a U.S. corporation that has an outbound transactions to…
No Tax Due on Foreign Corporation’s Redemption of U.S. Partnership Interest
Many businesses that operate outside of the U.S. want to do business in the U.S. and they want to limit their exposure to U.S. income taxes. To do this, many in-bound investments are structured as U.S. partnerships with the parntership being formed in the U.S. to carry on the business activities in the U.S. This…
U.S. Foreign Tax Credit Not Impacted by Repayment of Foreign Tax Refund
The tax assessment and collection process in most foreign countries is markedly different than the process in the U.S. These differences can present a number of challenges for U.S. citizens who reside in foreign countries. In Sotiropoulos v. Commissioner, T.C. Memo. 2017-75, the court considered one of these challenges, namely, how does one determine whether…
Court Decides Transfer Pricing Buy-in Payment Case
The transfer pricing disputes often involve transfers of property offshore. Taxpayers make these transfers so that the post-transfer profits earned from the offshored property are not subject to tax in the U.S. or, in many cases, not subject to tax in the foreign countries either. The U.S. Tax Court recently decided Amazon Inc. v. Commissioner,…
TIGTA Suggests IRS Follow Transfer Pricing Roadmap
Transfer pricing is and has been the most significant and difficult issue the IRS audits. The audits are typically closed with the IRS agents proposing unreasonably large adjustments and IRS appeals sustaining a very low percentage of the adjustments. The IRS has not been very successful in litigating transfer pricing cases either. As a result,…
Tax on Nonresident Alien Gambling Winnings
Are non-resident aliens who receive gambling winnings while visiting the U.S. able to deduct the gambling expenses incurred in earning the gambling winnings? And can they avoid the withholding tax on their gambling winnings? The court addresses these international tax law issues in Park v. Commissioner, 136 T.C. 569 (T.C. 2011). Facts & Procedural History…
Foreign Branch Income & the Research Tax Credit
The research tax credit is one of the most complicated provisions in our tax code. The international tax law aspects of this credit are even more difficult to follow. In Deere & Company v. Commissioner, 133 T.C. No. 11, the U.S. Tax Court considered whether income from foreign branches must be included in the gross…
U.S. International Tax Withholding & Reporting (Explained)
International tax law is a complex and ever-evolving area of law that governs the taxation of income earned by individuals and businesses across different countries. As globalization continues to increase, cross-border transactions become more prevalent, and more individuals and businesses work across borders, understanding international tax law has become increasingly important. One key area of…
What is a “Foreign Country” for Income Tax Purposes?
United States citizens are subject to tax in the U.S. on their worldwide earnings and income. This includes wages earned for work performed in foreign countries. There are exceptions to this treatment, such as the provisions of tax treaties. The other exception involves the foreign-earned-income exclusion. This exclusion allows individual taxpayers to exclude income earned…