The US IRS today published final regulations (TD 9792) providing rules regarding US property held by a controlled foreign corporation (CFC) in connection with certain transactions involving partnerships. The regulations finalize proposed regulations issued September 2, 2015.
In addition, the final regulations provide rules for determining whether a CFC is considered to derive rents and royalties in the active conduct of a trade or business for purposes of determining foreign personal holding company income (FPHCI), as well as rules for determining whether a CFC holds United States property as a result of certain related party factoring transactions. These rules were first proposed in 1988.
According to the Service, no changes are made to the proposed regulations under section 954 in the final version and the final regulations retain the basic approach and structure of the 2015 proposed regulations. Section 1.956-3 of the 1988 proposed regulations is adopted without substantive change in the final regulation, the Service said.
The Service also issued proposed regulations (REG-114734-16) that provide rules regarding the determination of the amount of United States property treated as held by a controlled foreign corporation (CFC) through a partnership.
Further, the Service also proposes (REG-122387-16) to withdraw portions of proposed regulations issued in 1988 because they were supplanted by the final regulations. These provisions relate to stock redemptions through related corporations, the application of section 956 to United States property indirectly held by a CFC, certain related party factoring transactions, and the definition of the term “obligation” for purposes of section 956.
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