The Internal Revenue Service (IRS) had broad examination authority to determine the correct amount of tax owed by taxpayers. In addition to seeking information directly from a taxpayer, the IRS is also authorized to seek information from third parties. However, Internal Revenue Code (Code) Section 7602(c)(1) requires that the IRS provide “reasonable notice in advance
Evan Walters focuses his practice on US and international taxation. He has experience across a wide range of issues involving corporate and partnership taxation. Read Evan Walter's full bio.
The 2017 Tax Act added a separate foreign tax credit limitation category, or basket, for income earned in a foreign branch. As a result, certain US groups may be limited in their ability to use foreign income taxes paid or accrued by a foreign branch as a credit against their US federal income tax liability.
This new limitation can present a problem for a taxpayer with losses in some foreign branches and income in other foreign branches. Consider, for example, a US consolidated group that has $1,000 of losses from Foreign Branch X and $1,000 of income in Foreign Branch Y on which it pays $200 of foreign income taxes. The group would have zero income in its foreign branch basket, and therefore the $200 of foreign taxes would not be currently usable as a foreign tax credit. The credits can be carried over to other tax years, but they may never be tax benefited if the above circumstances continue.