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Foreign Tax Credits for Individuals: Form 1116 Changes, Final Regulations, IRS Notice 2023-55

GILTI High-Tax Exception, Limitations and Calculations, Income Baskets, Carryovers

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, December 12, 2023

Recorded event now available

or call 1-800-926-7926

This course will provide a practical guide to completing Form 1116 to claim foreign tax credits (FTCs) in the aftermath of recently released regulations and considering the addition of the new Schedules K-2 and K3 for pass-through entities. The panel will outline which foreign taxes are eligible for foreign income tax credits after GILTI, discuss strategies for determining the optimal treatment of creditable foreign taxes, and describe the elections available for taxpayers with foreign income and taxes.

Description

U.S. taxpayers are entitled under Section 901 to claim FTCs for certain foreign income taxes, whether paid or deemed paid. However, the foreign tax credit rules are involved, the carryback and carryover periods are limited, and the availability of the credits is limited by the category or basket of income and by the ratio of foreign-source income to worldwide income.

Recent legislation has made significant and far-reaching changes to taxpayers' ability to claim FTCs under Section 901. Notice 2023-55 brought welcome relief from the prior final regulations that limited the ability to take credits for certain foreign taxes. While the IRS considers updating the 2022 final regulations, taxpayers can rely on prior regulations, to some extent. Tax professionals need to consider the impact of the notice on taxpayers. Wading through and understanding these complex legislative changes is challenging for tax professionals.

Listen as our expert panel provides a comprehensive guide to calculating FTCs and completing Form 1116. The panel will outline which foreign taxes are eligible for Section 901 FTC and discuss the recent changes to Form 1116.

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Outline

  1. Section 901 creditable foreign taxes
  2. Proposed and final regulations
  3. IRS Notice 2023-55
  4. Sourcing rules and grouping of income into baskets
  5. Income limitations
  6. Documentation and substantiation requirements and challenges
  7. Calculating credits and carryovers
  8. Crossover between Form 1116 and Schedules K-2 and K-3
  9. Preparing Form 1116

Benefits

The panel will discuss these and other important aspects of FTC calculations:

  • Identifying creditable foreign taxes
  • Basket groupings, foreign sourcing rules, and new income baskets
  • Impact of GILTI on tax calculations
  • Interest and other expense allocation
  • Strategies for using up foreign tax credit carryovers
  • Recently issued final and proposed regulations impacting FTCs

Faculty

Samtoy, John
John Samtoy
Tax Partner
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

Zhandalinova, Maria
Maria (Masha) Zhandalinova, CPA
Tax Manager
The Wolf Group

Ms. Zhandalinova is a CPA and Senior Tax Manager at The Wolf Group, who specializes in assisting entrepreneurs,...  |  Read More

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