Form 8832 Check-the-Box Entity Elections Under Section 7701: Selecting Entities for Foreign Operations

Using Hybrid Entities for Tax Arbitrage to Lower U.S. Tax on Eligible Foreign Income

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A


Thursday, September 26, 2019

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, August 30, 2019

or call 1-800-926-7926

This webinar will provide tax advisers with practical guidance on the advantages and pitfalls of utilizing the "check-the-box" entity selection for U.S. individuals with offshore business activities. The panel will discuss the various tax effects of specific elections, outline the tax timing and tax treatment, and explain repatriation and other implications of income from foreign subsidiaries under the 2017 tax reform legislation.

Description

Tax advisers are still digesting the impact of the 2017 tax legislation on businesses with offshore operations, particularly closely held enterprises. Numerous provisions in the Act make it necessary for tax advisers to determine which entity structure provides the best after-tax result for U.S. owners. Because the Internal Revenue Code, not the business situs country’s laws, govern the tax classification and treatment of a U.S. taxpayer’s foreign business holdings, tax advisers to small businesses engaged in cross border activities should evaluate whether their entity structure is optimal from a U.S. tax standpoint.

Section 7701 provides default classification rules for eligible entities but allows the entity to determine how it is classified for U.S. tax purposes. A foreign entity subject to U.S. tax must make its initial election when it becomes "relevant," i.e. when it impacts the U.S. tax liability of any person for either payment or informational return purposes. Taxpayers elect the tax treatment of their foreign business by completing Form 8832, Entity Classification Election, under the check-the-box provisions of Section 7701.

The general rule requires a taxpayer to wait five years after making an entity selection before changing the tax treatment of the foreign entity. However, Treas. Reg. 301.7701-3 allows specific exceptions to the 60-month rule for entity selection. Tax advisers must know the practical aspects of the check-the-box rules to ensure both flexibility and tax efficiency for U.S. taxpayers engaging in foreign business.

Listen as our expert panel provides thorough and practical guidance on the check-the-box regulations of Section 7701 and completing the entity classification election on Form 8832.

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Outline

  1. Basic entity classification rules for foreign entities owned by U.S. individuals
  2. Determination of when a foreign entity is “relevant” for U.S. income tax and information reporting purposes
  3. Evaluating tax consequences as part of entity selection determination
    1. Overview of Subpart F rules
    2. GILTI regime
    3. Section 962 election by an individual
    4. Distributions and sales of CFC stock under different entity models
    5. Review of provisions related to U.S. "territorial regime"
  4. Entity selection process and available elections
  5. Completing Form 8832

Benefits

The panel will discuss these and other important issues:

  • The implications of using check-the-box elections to pull foreign-source income out of Subpart F treatment
  • Retroactive entity selection and completing Form 8832
  • How to determine whether a foreign entity is "relevant" for U.S. taxation purposes
  • The impact of tax law changes on check-the-box elections and tactics to maximize tax savings

Faculty

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M.
Director, Tax Services
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Fuller, Pamela
Pamela A. Fuller, JD, LLM

Of Counsel
Tully Rinckey PLLC & Royse Law

Ms. Fuller advises a wide range of clients--including private and public companies, joint ventures, private equity...  |  Read More

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