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Retired FBI Agent: The Real Reason Trump’s Lawyers Don’t Want a Mueller Interview

Top Finance News - Wed, 01/10/2018 - 1:05pm

Retired FBI Agent: The Real Reason Trump’s Lawyers Don’t Want a Mueller Interview


Ethiopia will no longer allow foreigners to adopt its children

Top Finance News - Wed, 01/10/2018 - 12:29pm

Foreigners hoping to adopt children from Africa will have to strike Ethiopia off their list. The country’s parliament has pulled the plug on international adoptions by foreigners in a bid to protect children from possible abuse by their new parents. That possibility was highlighted in 2012 when, in a grim trial, an American couple were…


Trump can't survive an immigration 'surrender'

Top Finance News - Wed, 01/10/2018 - 12:22pm

President Trump needs to stand firm on his demand for more border security in return for any 'Dreamer' deal, says Jake Novak.


Fannie Mae CEO: People Need Calm, Confident Leadership

Top Finance News - Wed, 01/10/2018 - 12:13pm

Tim Mayopoulous led the company through difficult times by setting a consistent tone.


Enterprise Products Partners LP (NYSE:EPD): What’s The Analyst Consensus Outlook?

Top Finance News - Wed, 01/10/2018 - 12:12pm

The latest earnings release Enterprise Products Partners LP’s (NYSE:EPD) announced in September 2017 revealed that the company experienced a minor headwind with earnings falling from $2,512.5M to $2,500.2M, a changeRead More...


Ethereum and Bitcoin Cash Rise as Other Cryptocurrencies Tumble

Top Finance News - Wed, 01/10/2018 - 12:09pm

The price of both Ethereum--the world's second-largest cryptocurrency in terms of total market capitalization--and Bitcoin Cash--a so-called "hard fork" of the original Bitcoin--is soaring on Wednesday, despite steep declines in many other cryptocurrencies.


Why Did Frontier Communications Corp. Stock Drop 85% in 2017?

Top Finance News - Wed, 01/10/2018 - 12:04pm

The company saw nothing but bad news all year long.


Trump's tax bill will make 2018 a wild year for divorce

Top Finance News - Wed, 01/10/2018 - 11:31am

The tax benefit is shifting from one spouse to the other when it comes to alimony payments, thanks to the GOP tax bill that was signed into law.


Mark Wahlberg raked in $68 million in 2017 — but he's the most overpaid actor in Hollywood

Top Finance News - Wed, 01/10/2018 - 11:28am

Mark Wahlberg is the highest-paid actor in Hollywood, according to Forbes. Wahlberg was paid 1,500 times as much as his costar, Michelle Williams, for "All the Money in the World," according to USA Today.


If the Dems don't win in November, 'we're screwed': Billi...

Top Finance News - Wed, 01/10/2018 - 11:12am

Tom Steyer, NextGen America founder & president and billionaire Democratic donor, discusses his views on pushing the Democratic agenda for the 2018 midterms as well as what he thinks about tax reform.


Warren Buffett Just Ripped Cryptocurrency to Shreds

Top Finance News - Wed, 01/10/2018 - 10:56am

'They will come to a bad ending.'


3 Beaten-Down Oil Stocks to Buy With Oil at a 3-Year High

Top Finance News - Wed, 01/10/2018 - 9:46am

These three top-tier oil producers have underperformed even though crude recently hit its highest level in years.


Warren Buffett: We'd buy GE at the 'right number'

Top Finance News - Wed, 01/10/2018 - 8:45am

Warren Buffett, Berkshire Hathaway chairman and CEO, shares his thoughts on Apple, General Electric and having cash on hand.


Warren Buffett: When I buy an iPhone, it's all over from ...

Top Finance News - Wed, 01/10/2018 - 8:41am

Warren Buffett, Berkshire Hathaway chairman and CEO, discusses still having a flip phone and his reminders from Apple CEO Tim Cook on buying an iPhone.


Stick with General Electric Company Stock for the Long Term

Top Finance News - Wed, 01/10/2018 - 6:49am

Here’s a headline you don’t hear too often these days: General Electric Company (NYSE:GE) stock is popping. GE stock, which has long been dinged as the Dow’s biggest loser, has had a remarkable start to 2018. Has GE stock turned a corner?


High Oil Prices, the Return of $3 Gas a Threat to the Economy

Top Finance News - Wed, 01/10/2018 - 6:35am

If $70 a barrel oil becomes the new normal, $3 a gallon gasoline prices are just behind it. That cannot be good for the economy in almost all cases.


Cisco Systems, Inc. Stock Has Room to Grow Despite Massive Rally

Top Finance News - Wed, 01/10/2018 - 5:40am

Shares of Cisco Systems, Inc. (NASDAQ:CSCO) have been on absolute fire since mid-November. Although the company beat on earnings and revenue expectations, year-over-year (YoY) sales fell 1.7%. Still, investors shrugged it off and began bidding Cisco stock higher. Since then, CSCO stock is up more than 17%.


Huawei's big US push is in tatters after AT&T canceled a distribution deal for its latest phone

Top Finance News - Wed, 01/10/2018 - 4:44am

AT&T has reneged on Huawei's first distribution deal with a US carrier, leaving the firm's expansion ambitions in tatters. Huawei is reportedly trying to secure a new deal with the AT&T rival Verizon, but political pressure may mean the firm will struggle to find a new US partner. The collapse of the deal coincides with US politicians expressing concerns that Huawei is a security threat.


Judge blocks Trump decision to end young immigrant program

Top Finance News - Wed, 01/10/2018 - 1:48am

SAN FRANCISCO (AP) — A federal judge on Tuesday night temporarily blocked the Trump administration's decision to end a program protecting young immigrants from deportation.


Treasury Releases Notice Providing Guidance on Deferred Foreign Earnings and the Transition Tax (Code Section 965)

Tax Publications - Wed, 01/10/2018 - 12:00am
Summary On December 29, 2017, the Department of the Treasury and the Internal Revenue Service (collectively, “Treasury”) issued Notice 2018-07 (the “Notice”).  The Notice provides guidance on new Section 965, Treatment of deferred foreign income upon transition to participation exemption system of taxation, which was enacted on December 22, 2017.  The Notice states that Treasury intends to issue regulations for determining amounts included in gross income by a U.S. shareholder under Section 951(a)(1) by reason of Section 965.  Additionally, Treasury also requested comments on the rules described in the Notice as well as comments regarding what additional guidance should be issued to assist taxpayers in applying Section 965.
  Details In general, Section 965(a) provides that for the last taxable year of a deferred foreign income corporation (“DFIC”)[1] that begins before January 1, 2018 (such year of the DFIC, the “inclusion year”), the subpart F income of the corporation (as otherwise determined for such taxable year under Section 952) shall be increased by the greater of (1) the accumulated post-1986 deferred foreign income of such corporation determined as of November 2, 2017, or (2) the accumulated post-1986 deferred foreign income of such corporation determined as of December 31, 2017 (each such date, a “measurement date,” and the greater of the accumulated post-1986 deferred foreign income of the corporation as of the measurement dates, the “Section 965(a) earnings amount”).
 
Section 965 contains various rules including, but not limited to, rules for determining earnings and profits of DFICs, determining the aggregate foreign cash position of U.S. shareholders in specified foreign corporations, netting among U.S. shareholders in the same affiliated group, and applying the participation exemption to the income included under Section 965.[2]
 
The Notice provides that Treasury plans to issue regulations addressing the application of Section 965 including regulations to provide guidance on (1) determining aggregate foreign cash positions of U.S. shareholders in specified foreign corporations, (2) determining accumulated post-1986 deferred foreign income of DFICs, (3) applying Section 961 to amounts treated as subpart F income under Section 965, (4) the treatment of affiliated groups making a consolidated return for purposes of Section 965, and (5) determining foreign currency gain or loss under Section 986(c) on distributions of earnings previously taxed under Section 965. The guidance provided in the Notice on these items is summarized below.

1. Determining Aggregate Foreign Cash Positions
If specified foreign corporations have inclusion years that end in or with different taxable years of the same U.S. shareholder, Section 965 could result in double-counting such shareholder’s aggregate foreign cash position for purposes of determining the shareholder’s deduction under Section 965(c).  The Notice provides that Treasury intends to issue regulations providing that in the case of a U.S. shareholder that has a Section 965(a) inclusion amount in more than one taxable year, the aggregate foreign cash position taken into account in the first taxable year will equal the lesser of the U.S. shareholder’s aggregate foreign cash position or the aggregate of the Section 965(a) inclusion amounts taken into account by the U.S. shareholder in that taxable year.  Furthermore, the amount of the U.S. shareholder’s aggregate foreign cash position taken into account in any succeeding taxable year will be its aggregate foreign cash position reduced by the amount of its aggregate foreign cash position taken into account in any preceding taxable year.[3]
 
Additionally, for purposes of determining the aggregate foreign cash position of a U.S. shareholder for a taxable year in which it takes into account a Section 965(a) inclusion amount, future regulations will provide that the U.S. shareholder can assume that its pro rata share of the cash position of any specified foreign corporation with an inclusion year ending after the date the return for such taxable year of such U.S. shareholder is timely filed (including extensions, if any) will be zero as of the cash measurement date with which the inclusion year ends.  If a U.S. shareholder’s pro rata share of the cash position of a specified foreign corporation was treated as zero pursuant to the preceding sentence, and the amount described in Section 965(c)(3)(A)(i) in fact exceeds the amount described in Section 965(c)(3)(A)(ii), the U.S. shareholder must make appropriate adjustments to reflect that the 15.5 percent rate equivalent percentage applies to a greater amount of the aggregate Section 965(a) inclusion amounts taken into account.[4]  The Notice provides that Treasury expects to issue future guidance regarding the appropriate method for making such an adjustment.[5]
 
Net accounts receivables and short-term obligations between related specified foreign corporations may inflate the aggregate foreign cash position of a U.S. shareholder relative to the actual aggregate amount of liquid assets (other than the intercompany receivables) owned by the specified foreign corporations of the U.S. shareholder. Accordingly, for purposes of determining the cash position of a specified foreign corporation with respect to net accounts receivable and short-term obligations, the Notice provides that Treasury intends to issue regulations providing that, with respect to a U.S. shareholder, any receivable or payable of a specified foreign corporation from or to a related specified foreign corporation will be disregarded to the extent of the common ownership of such specified foreign corporations by the U.S. shareholder. 
 
Under Section 965(c)(3)(B)(iii)(V), the Secretary may identify any asset as being economically equivalent to any asset described in Section 965(c)(3)(B).  The Notice provides that Treasury intends to issue regulations that address the treatment of derivative financial instruments for purposes of measuring the cash position of a specified foreign corporation.  Derivative financial instruments include notional principal contracts, options contracts, forward contracts, futures contracts, short positions in securities and commodities, and any similar financial instruments.  These regulations will provide that the cash position of any specified foreign corporation generally will include the fair market value of each derivative financial instrument held by the specified foreign corporation that is not a “bona fide hedging transaction” (as defined in this Section 3.01(c) of the Notice).  The Notice provides additional details relating to derivative financial instruments and hedging transactions.[6]   
 
2. Determining Accumulated Post-1986 Deferred Foreign Income
Certain transactions between specified foreign corporations may result in earnings and profits of a specified foreign corporation being taken into account more than once or not at all by a U.S. shareholder under Section 965(a).  Consistent with congressional intent, the Notice provides that Treasury intends to issue regulations to address the possibility of double-counting or double non-counting in the computation of post-1986 earnings and profits arising from amounts paid or incurred (including certain dividends) between related specified foreign corporations of a U.S. shareholder that occur between measurement dates and that would otherwise reduce the post-1986 earnings and profits as of December 31, 2017, of the specified foreign corporation that paid or incurred such amounts. The Notice includes examples illustrating adjustments that will be included in regulations that are necessary to address these issues.[7]
 
The post-1986 earnings and profits of a specified foreign corporation are reduced to reflect dividends distributed during the corporation’s inclusion year to another specified foreign corporation (“the dividend reduction rule”).[8]  As a result, a dividend paid by a specified foreign corporation to another specified foreign corporation (whether in an inclusion year or a prior taxable year, including a prior taxable year that includes a measurement date) generally reduces the corporation’s post-1986 earnings and profits with respect to any measurement date that such dividend precedes.
 
The dividend reduction rule is intended to address the potential double-counting of the earnings and profits of the distributing specified foreign corporation in calculating the Section 965(a) inclusion amounts taken into account by a U.S. shareholder with respect to the distributing specified foreign corporation and the distributee specified foreign corporation. To the extent that a portion of a distribution reduces the post-1986 earnings and profits of a distributing specified foreign corporation (for example, by reason of a reduction pursuant to Section 312(a)(3)) in an amount in excess of the increase in the post-1986 earnings and profits of the distributee specified foreign corporation, such reduction would not relieve double-counting and thus would be inconsistent with the purpose of the rule. Accordingly, the Notice provides that Treasury intends to issue regulations to clarify that the amount by which the post-1986 earnings and profits of a specified foreign corporation is reduced under Section 965(d)(3)(B) as a result of a distribution made to a specified foreign corporation in the inclusion year may not exceed the amount by which the post-1986 earnings and profits of the distributee corporation is increased as a result of the distribution.
 
In the case of a CFC that has shareholders that are not U.S. shareholders on a measurement date, the Notice provides that Treasury intends to issue regulations providing that the accumulated post-1986 deferred foreign income of the CFC on such measurement date will be reduced by amounts that would be described in Section 965(d)(2)(B) if such shareholders were U.S. shareholders.  In such cases, the regulations will follow the principles of Revenue Ruling 82-16, 1982-1 C.B. 106, to determine the amounts by which accumulated post-1986 deferred foreign income is reduced.[9]
 
The Notice also provides that Treasury intends to issue regulations to clarify the interaction between the rules under Sections 959 and 965 in the inclusion year of a DFIC and the taxable year of a U.S. shareholder of the DFIC in which or with which such inclusion year ends.  Such regulations will describe the following steps for determining the Section 965(a) inclusion amount of a DFIC, the treatment of distributions under Section 959, and the amount of an inclusion under Sections 951(a)(1)(B) and 956 with respect to a DFIC:
 
  1. First, the subpart F income of the DFIC is determined without regard to Section 965(a), and the U.S. shareholder’s inclusion under Section 951(a)(1)(A) by reason of such amount is taken into account.
  2. Second, the treatment of a distribution from the DFIC to another specified foreign corporation that is made before January 1, 2018, is determined under Section 959.
  3. Third, the Section 965(a) inclusion amount of the DFIC is determined, and the U.S. shareholder’s inclusion under Section 951(a)(1)(A) by reason of such amount is taken into account.
  4. Fourth, the treatment of all distributions from the DFIC other than those described in step 2 is determined under Section 959.
  5. Fifth, an amount is determined under Section 956 with respect to the DFIC and the U.S. shareholder, and the U.S. shareholder’s inclusion under Section 951(a)(1)(B) is taken into account.[10]
 
3. Applying Section 961 to Amounts Treated as Subpart F Income under Section 965
Section 965(o) authorizes Treasury to issue regulations or other guidance to provide appropriate basis adjustments to carry out the provisions of Section 965.  To provide certainty regarding the application of the rules described in Section 961 with respect to amounts included under Section 965, the Notice provides that Treasury intends to issue regulations providing that if a U.S. shareholder receives distributions from a DFIC during the inclusion year that are attributable to previously taxed income described in Section 959(c)(2) by reason of Section 965(a), the amount of gain recognized by the U.S. shareholder with respect to the stock of the DFIC under Section 961(b)(2) will be reduced (but not below zero) by the Section 965(a) inclusion amount.
 
4. Treatment of Affiliated Groups  Making a Consolidated Return for Purposes of Section 965
Pursuant to the Secretary’s authority under Sections 965(o) and 1502, the Notice provides that Treasury intends to issue regulations providing that, solely with respect to the calculation of the amount included in gross income by a consolidated group (as defined in §1.1502-1(h)) under Section 951(a)(1) by reason of Section 965(a), all of the members of a consolidated group that are U.S. shareholders of one or more specified foreign corporations will be treated as a single U.S. shareholder. Thus, for example, all members of a consolidated group that are U.S. shareholders will be treated as a single U.S. shareholder for purposes of determining the aggregate foreign cash position of the consolidated group and for purposes of taking such aggregate foreign cash position into account under Section 965(c)(1).
 
These regulations will provide that, consistent with the consolidated return regulations (and notwithstanding the calculation of the amount described in the prior paragraph), appropriate adjustments, for example, adjustments under Section 1.1502-32 to the basis of the stock of each member that is a U.S. shareholder, will be made to reflect the impact of amounts included in gross income under Section 951(a)(1) by reason of Section 965(a), and the impact of other attributes of each member on this calculation, such as the ownership of E&P deficit foreign corporations by particular members and the cash position of specified foreign corporations held by particular members.  These regulations will also provide that taxpayers must make appropriate adjustments reflecting minority ownership interests in a member of the consolidated group that are owned by a person that is not a member of the consolidated group.
 
5. Determining Foreign Currency Gain or Loss under Section 986(c)
The Notice provides that Treasury intends to issue regulations providing that any gain or loss recognized under Section 986(c) with respect to distributions of previously taxed income described in Section 959(c)(2) by reason of Section 965(a) will be diminished proportionately to the diminution of the taxable income resulting from Section 965(a) by reason of the deduction allowed under Section 965(c).[11] 
 
The adjustments with respect to Section 986(c) must be made so as to apply solely with respect to distributions of previously taxed income described in Section 959(c)(2) by reason of Section 965(a).  Accordingly, future regulations will also provide ordering rules for determining the portion of a distribution that will be treated as previously taxed income described in Section 959(c)(2) by reason of Section 965(a).
  Effective Dates Section 965 is effective for the last taxable years of foreign corporations that begin before January 1, 2018, and with respect to U.S. shareholders, for the taxable years in which or with which such taxable years of the foreign corporations end.  The Notice provides that Treasury intends to provide that the regulations described in the Notice are effective beginning the first taxable year of a foreign corporation (and with respect to U.S. shareholders, the taxable years in which or with which such taxable years of the foreign corporations end) to which Section 965 applies.  Before the issuance of the regulations described in the Notice, taxpayers may rely on the rules described in the Notice.
  BDO Insights The Notice provides welcomed guidance and logical approaches to address various questions regarding the application of Section 965 and the transition tax. It is likely that additional guidance relating to the transition tax will be forthcoming in the near future given that there are still several unanswered questions relating to Section 965.
 
For more information, please contact one of the following practice leaders:
  Joe Calianno
Partner and International Technical Tax Practice Leader, National Tax Office   Monika Loving
Partner and International Tax Practice Leader   Annie Lee
Partner   Chip Morgan
Partner   Robert Pedersen
Partner   William F. Roth III
Partner, National Tax Office   Jerry Seade
Principal   Natallia Shapel
Partner       Sean Dokko
Senior Manager, National Tax Office       [1] For purposes of Section 965, a DFIC is, with respect to any U.S. shareholder, any specified foreign corporation of such U.S. shareholder that has accumulated post-1986 deferred foreign income (as of a measurement date) greater than zero.  Section 965(d)(1).  The term “accumulated post-1986 deferred foreign income” means the post-1986 earnings and profits of the specified foreign corporation except to the extent such earnings and profits (A) are attributable to income of the specified foreign corporation that are effectively connected with the conduct of a trade or business within the United States and subject to tax under Chapter 1 (“effectively connected income”), or (B) in the case of a controlled foreign corporation (“CFC”), if distributed, would be excluded from the gross income of a U.S. shareholder under section 959 (“previously taxed income”).  Section 965(d)(2). See Section 965(d)(3) for more details on “post-1986 earnings and profits.”
Section 965(e)(1) provides that the term “specified foreign corporation” means (A) any CFC, and (B) any foreign corporation with respect to which one or more domestic corporations is a U.S. shareholder (10-percent corporation).  For purposes of Sections 951 and 961, a 10-percent corporation is treated as a CFC solely for purposes of taking into account the subpart F income of such corporation under section 965(a).  Section 965(e)(2).  However, if a passive foreign investment company (as defined in section 1297) with respect to the shareholder is not a CFC, then such corporation is not a specified foreign corporation.  Section 965(e)(3).
  [2] See Section 965 for additional details.
  [3] For an illustration of these rules, see the first example in Section 3.01(a) of the Notice.
  [4] Section 965(c)(3)(A) provides that the term “aggregate foreign cash position” means, with respect to any United States shareholder, the greater of (i) the aggregate of such United States shareholder’s pro rata share of the cash position of each specified foreign corporation of such United States shareholder determined as of the close of the inclusion year, or (ii) one half of the sum of (I) the aggregate described in clause (i) determined as of the close of the last taxable year of each such specified foreign corporation that ends before November 2, 2017, plus (II) the aggregate described in clause (i) determined as of the close of the taxable year of each such specified foreign corporation which precedes the taxable year referred to in subclause (I).  Each date referred to in the preceding sentence is referred to as a “cash measurement date.”
  [5] See the second example in Section 3.01(a) of the Notice for an illustration of these rules.
  [6] For additional details, see section 3.01(c) of the Notice.
  [7] For an illustration of these rules, see section 3.02(a), Examples 1 – 4 of the Notice.
  [8] Section 965(d)(3)(B).
  [9] For an illustration of these rules, see the example in Section 3.02(c) of the Notice.
  [10] For an illustration of these rules, see the example in Section 3.02(d) of the Notice.
  [11] See H.R. Rep. No. 115-466, at 620.
 
 
 

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