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IRS provides roadmap for examining subpart F foreign base company income functional analysis

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February 2016


The IRS Large Business and International Division issued an International Practice Unit on September 29, 2015 that provides field examiners with audit guidelines for functional analyses of foreign base company income issues. The IPU addresses basic issues under Section 954(c) as to whether a controlled foreign corporation has income that should be taxable as FBCI or could be subject to an FBCI exception. Overall, the IPU provides a non-exclusive list of suggested procedures an examiner may consider performing in order to identify and understand a CFC’s transaction flows and the amount, if any, of the CFC’s subpart F income.

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Michael DiFronzo

Washington National Tax Services International Tax Leader, PwC US

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