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

Note: CLE credit is not offered on this program

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

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Conducted on Monday, July 18, 2022

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Course Materials

This course 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 treatment, and explain repatriation and the implications of entity selection on tax treatment.

Description

Numerous provisions 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. The U.S. Check-the-Box Regulations - Background
  2. Basic Entity Classification Rules for Foreign Entities owned by U.S. Persons
  3. The Greatly Increased U.S. Tax Stakes for US Persons in Selecting the FORM of a Foreign Entity
  4. Advanced Tax Considerations (and Modeling) in Foreign Entity Selection Process
  5. Completing IRS Form 8832 and late elections
  6. Advanced Entity Selection considerations in light of Recently finalized U.S. Anti-Hybrid §267A Regs and foreign anti-hybrid rules

Benefits

The panel will discuss these and other vital 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

Fuller, Pamela
Pamela A. Fuller, Esq., J.D., LL.M. (Taxation)
Senior Counsel (Tax, M&A, International)
Tully Rinckey PLLC and Zahn Law Group

Ms. Fuller’s practice has a triple focus: tax planning, tax controversies, and tax compliance. She advises a wide...  |  Read More

Kalungi, Ronald
Ronald Kalungi, JD, LLM
Director of International Tax
Drucker & Scaccetti

Mr. Kalungi provides tax planning, tax compliance and business consulting services to a broad base of clients including...  |  Read More

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