Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has identified a transaction wherein a U.S. taxpayer owns a controlled foreign corporation (CFC) that holds stock of a lower tier CFC through a domestic partnership that takes a position that subpart F income of a lower tier CFC does not result in income inclusion as another type of transaction that has potential for tax avoidance or evasion for purposes of Reg. §1.6011-4(b)(6) and Code Secs. 6111 and 6112. The U.S. taxpayer takes the position that the subpart F income of a lower tier CFC was already included in the domestic partnership's income, which is not subject to U.S. tax and, thus, should not be included in the income of the U.S. taxpayer. Without the interposition of the domestic partnership, the subpart F income of the lower tier CFC would be taxable to the U.S. taxpayer.

  The IRS is concerned that taxpayers are taking the position that the structures describedresult in no income inclusion under Code Sec. 951. Therefore, the IRS has identified these structures and other substantially similar transactions as transactions of interest that are contrary to the purpose and intent of the provisions of subpart F.

  Persons who entered into these transactions on or after November 2, 2006, must disclose the transactions. Material advisors who make tax statements on or after November 2, 2006, must comply with disclosure and list maintenance obligation. Otherwise, penalties under Code Sec. 6707(a), 6707A or 6708(a) and accuracy-related penalties will be imposed.

Notice 2009-7,
2009FED ¶46,215

Other References:

 
Code Sec. 951

  CCH Reference - 2008FED ¶28,474.021

 
Code Sec. 6011

  CCH Reference - 2008FED ¶35,141.06

  CCH Reference - 2008FED ¶35,141.78

 
Code Sec. 6111

  CCH Reference - 2008FED ¶37,002.156

 
Code Sec. 6112

  CCH Reference - 2008FED ¶37,022.157

  Tax Research Consultant

  CCH Reference - TRC FILEBUS: 9,450.10
CCH Reference - TRC FILEBUS: 9,454.05