IRS grants foreign-stock relief

New regulations from the Internal Revenue Service provide relief to some U.S. taxpayers who own stock in certain foreign corporations.

Rev. Proc. 2019-40 and the proposed regulations limit the inquiries required by U.S. taxpayers to determine whether certain foreign businesses are controlled foreign corporations.

The revenue procedure also allows some unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their Subpart F and GILTI inclusions, as well as satisfy reporting requirements with respect to certain CFCs if more detailed tax information is unavailable. It also provides penalty relief to taxpayers in the specified circumstances.

Sign in front of IRS building in Washington, D.C.
The IRS building in Washington, D.C.

The IRS will amend instructions for Form 5471 to reduce the amount of information that some unrelated minority U.S. shareholders of the CFC are required to provide. It will also limit the filing requirements of U.S. shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

The proposed regulations provide additional relief to taxpayers affected by the repeal of Section 958(b)(4), which was part of the Tax Cuts and Jobs Act.

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