Aug 9, 2026 · 1 hr 2 min · 13 segments
This week we look at: - Transitioning Foreign Tax Allocations and Implementing the Ten Percent Credit Disallowance Under Section 960(d)(4) - Trustee-to-Trustee Transfers of Inherited IRAs Through an…
These are Regulations 115.145-25 that establish transition rules for specified foreign corporations that faced year-end shifts after the repeal of IRC Section 898C2.
The proposed regs, they're going to be found in the, basically, the Federal Register published on July 31st.
And again, fixing up these things and also involve changes made in the one big beautiful bill act, although I now believe I'm seeing it referred to at least one IRS audit guide as the workers tax cut bill or something similar, whatever it is.
I take it that kind of means that One Big Beautiful Bill Act is now considered to didn't poll well anymore.
I'm starting to call it the One Big Beautiful Bill Act because we've been doing that since day one.
And, you know, hopefully you don't make up your decision as to what to vote for an election by the name of the bill.
The Section 7352 of that bill repealed the one-month taxable year deferral election for specified foreign corporations.
And those corporations had to transition to end their taxable year at the same time, you know, basically as their majority or shareholder.
And SFCs, those are the specified foreign corporations, utilizing this one month deferral will face a short taxable year that was typically December 1st, 2025 to December 31st, 2025.
Yes, I realize that's in the past, but we're a little behind in regs, so we're getting there, right? Now, there was a tax accounting problem here that they were trying to solve.
And we've kind of known the direction the service was going to be going for a while.
But we'll go ahead and we'll give you kind of the background here of what's going on.
The real issue is foreign taxes paid or accrued by the SFCs are recognized at the end of the foreign taxable year.
With the compressed short years, a full year of foreign income tax would accrue in a single U.S. tax month.
So this tax accounting mismatches and a potential loss of foreign tax credits for U.S. shareholders because we got this big blob of tax in one month.
These are Regulations 115.145-25 that establish transition rules for specified foreign corporations that faced year-end shifts after the repeal of IRC Section 898C2.
The proposed regs, they're going to be found in the, basically, the Federal Register published on July 31st.
And again, fixing up these things and also involve changes made in the one big beautiful bill act, although I now believe I'm seeing it referred to at least one IRS audit guide as the workers tax cut bill or something similar, whatever it is.
I take it that kind of means that One Big Beautiful Bill Act is now considered to didn't poll well anymore.
I'm starting to call it the One Big Beautiful Bill Act because we've been doing that since day one.
And, you know, hopefully you don't make up your decision as to what to vote for an election by the name of the bill.
The Section 7352 of that bill repealed the one-month taxable year deferral election for specified foreign corporations.
And those corporations had to transition to end their taxable year at the same time, you know, basically as their majority or shareholder.
And SFCs, those are the specified foreign corporations, utilizing this one month deferral will face a short taxable year that was typically December 1st, 2025 to December 31st, 2025.
Yes, I realize that's in the past, but we're a little behind in regs, so we're getting there, right? Now, there was a tax accounting problem here that they were trying to solve.
And we've kind of known the direction the service was going to be going for a while.
But we'll go ahead and we'll give you kind of the background here of what's going on.
The real issue is foreign taxes paid or accrued by the SFCs are recognized at the end of the foreign taxable year.
With the compressed short years, a full year of foreign income tax would accrue in a single U.S. tax month.
So this tax accounting mismatches and a potential loss of foreign tax credits for U.S. shareholders because we got this big blob of tax in one month.
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