Insights & News

Tax Insights, October 14, 2015
Tracking Tax News You Need to Know

October 14, 2015

IRS Releases Ruling on Investor Control: Investments Will Not Cause Contract Holders to Be Treated as Owners
In Private Letter Ruling 201540004, the IRS ruled that the investments of a regulated investment company (fund) will not cause variable contract holders to be treated as the owners of the fund's shares for federal income tax purposes. The fund's principal investment strategy is to actively allocate the fund's assets among a broad range of income-producing investments. The fund may invest all or a portion of its assets in exchange-traded funds (ETFs) that qualify as regulated investment companies, including ETFs affiliated with the fund's subadviser.

OECD Publishes Final BEPS Package Ahead of G-20 Meeting
On Oct. 5, the OECD presented the final package of measures for a comprehensive, coherent and coordinated reform of the international tax rules to be discussed by G-20 finance ministers. The final package of base erosion and profit shifting (BEPS) measures includes new minimum standards on country-by-country reporting, treaty shopping, curbing harmful tax practices, and effective mutual agreement procedures. The BEPS package also revises the guidance on the application of transfer pricing rules to prevent taxpayers from using so-called cash box entities to shelter profits in low or no-tax jurisdictions, and redefines the key concept of permanent establishment, to curb arrangements which avoid the creation of a taxable presence in a country by reliance on an outdated definition.

Financial Institution Not Required to Report Discharge of Debt
In Private Letter Ruling 201540009, the IRS ruled that a financial institution is not required to file Forms 1099-C with respect to the write-off of deficiency balances pursuant to a settlement agreement and preliminary order because the discharge was not the result of an identifiable event listed in Treasury Regulation Section 1.6050P-1(b)(2), but rather was by operation of state law. The settlement agreement required the financial institution to write off balances owed, acknowledged that the financial entity was entering the settlement to eliminate the risk, acknowledged the burden and expense of further litigation, and acknowledged that the financial institution was barred under state law from collecting deficiency balances.

IRS Announces That U.S. Begins Exchange of Tax Information Under IGAs
The IRS announced on Oct. 2 the exchange of financial account information with certain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA.

Numerous Competent Authority Arrangements Available
The U.S. competent authorities have signed arrangements with the following countries under the respective country's intergovernmental agreements with the U.S. to implement the information reporting and withholding tax provisions of the FATCA:

Information on Foreign Partnership, Trust Agreements Added to FATCA FAQ

The IRS has updated a list of frequently asked questions on FATCA requirements to provide information on the effective date of an entity's withholding foreign partnership or trust agreement if the entity submits an application for withholding foreign partnership or trust status on or after April 1 and is approved.

IRS Releases Draft FATCA Report Form for 2015
The IRS has released a draft version of the 2015 Form 8966, "FATCA Report," which includes all of the information that must be reported to the IRS as required by FATCA.

IRS Corrects Final Regulations on Examples in RIC Controlled Group Rules
The IRS has made revisions to the examples that illustrate the controlled group rules applicable to regulated investment companies in final regulations issued Sept. 15 (see our Tax Advisor dated Oct. 8, 2015). 

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest. 

Copyright © 2015 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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