Individual Foreign Tax Credit: Advanced-Level Calculations and Planning

Identifying OFL and ODL Situations, Calculating Losses for Offsets, Available Elections, and Avoiding Adverse HTKO Results

This program is being postponed from 10-5-17 to a new date TBD

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


Sunday, December 31, 2017

1:00pm-2:50pm EST, 10:00am-11:50am PST

(Alert: Event date has changed from 10/5/2017!)

or call 1-800-926-7926

This webinar will provide tax advisers with a thorough and practical guide to more advanced concepts in calculating and maximizing the benefits of foreign tax credits. The panel will go beyond the basics to discuss avoiding high-tax kickout (HTKO) treatment, using overall domestic loss (ODLs) and overall foreign loss (OFLs) to maximize foreign tax credit benefits and navigating OFL recapture and recharacterization rules. The webinar will feature concrete examples of the calculations and reporting of these advanced concepts.

Description

The complexities of the foreign tax credit rules can present significant challenges to tax advisers, even those who have significant experience in the mechanics of completing Form 1116. Overall foreign or domestic losses, as well as income from HTKO countries, can have significant impact on currently available foreign credits as well as carry-forward amounts.

For advisers to taxpayers in either foreign or domestic net loss positions, determining how to best utilize the Section 904 foreign tax credit can be particularly difficult. An OFL occurs when a taxpayer’s foreign deductions exceed foreign income. Taxpayers in an OFL position may use the OFL as a deduction to offset current U.S. source income; however, this may impact the treatment of subsequent foreign income once the loss has been eliminated.

Foreign tax credit calculations and planning become even more complicated when a taxpayer is in an ODL position. ODLs occur when a taxpayer’s domestic losses exceed net foreign income. Taxpayers with an ODL may use the loss to offset taxable foreign income; however, an ODL can only be created in a credit year, and subsequent year’s domestic income is subject to recapture as foreign-source. Tax advisers must understand the OFL and ODL rules to avoid costly tax mistakes.

Listen as our experienced panel goes beyond the basics to provide practical guidance to some of the most complex foreign tax credit calculations and considerations.

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Outline

  1. Identifying and calculating OFLs
  2. Identifying and calculating ODLs
  3. Using OFL and ODL offsets
  4. Subsequent year recaptures of offset amounts
  5. HTKO rules and calculations

Benefits

The panel will discuss these and other important and complex topics:

  • Challenges in determining whether a taxpayer has an OFL or ODL
  • What is the impact of a prior year decision to deduct foreign taxes during an OFL year on claiming credits for indirect foreign taxes and repatriation of foreign-source income?
  • What do advisers serving clients in ODL situations who have used the ODL to offset foreign-source income need to know about subsequent year recapture of domestic income?
  • How do the grouping rules work in determining whether foreign-source income is “high-taxed” and subject to HTKO treatment?

Faculty

Mehany, Dianne
Dianne C. Mehany

Member
Caplin & Drysdale

Ms. Mehany's practice focuses on international tax planning and controversies, including inbound and outbound tax...  |  Read More

Kennedy-C. Edward
C. Edward Kennedy, Jr., CPA, JD

Brady Ware & Company

Mr. Kennedy has more than 34 years of experience dealing with a variety of international tax matters, specializing...  |  Read More

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