Section 905(c) Mysteries

Section 905(c) specifies how taxpayers are to account for foreign tax redeterminations. Probably the most common foreign tax redetermination today is a situation like the following example. In year 1, the year to which the tax relates, the taxpayer pays and accrues 100 of foreign tax. In year 6, the...

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Bibliographic Details
Published in:Journal of International Taxation 2017-07, Vol.28 (7), p.22
Main Authors: Fischl, Alan, Nelson, Elizabeth, Afshar, Anisa
Format: Article
Language:English
Subjects:
Foreign tax credits
Income taxes
Internal Revenue Code
International taxation
Tax assessments
Tax audits
Tax credits
Tax increases
Tax regulations
Taxpayers
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Summary:Section 905(c) specifies how taxpayers are to account for foreign tax redeterminations. Probably the most common foreign tax redetermination today is a situation like the following example. In year 1, the year to which the tax relates, the taxpayer pays and accrues 100 of foreign tax. In year 6, the foreign tax authority assesses additional foreign tax of 50 for year 1 at the conclusion of a foreign tax audit. An important question that Section 905(c) and the Regulations thereunder address is whether the additional 50 assessment is a foreign tax to be accounted for in year 1 or, instead, in year 6. Section 905(c) has become more important in recent years as foreign tax authorities have grown more aggressive in their audits and assessed additional foreign taxes of greater size and more frequently. This article addresses primarily these issues, including the relevance of Notice 2016-52, 2016-40 IRB 425.
ISSN:1049-6378