Close
Close

Regs limit Sec. 245A dividends-received deduction

RFP
Tax Hot Topics newsletter The IRS recently issued final regulations (T.D. 9909) and proposed regulations (REG-124737-19) under Sections 245A and 954(c)(6) limiting gap-year and other planning strategies that use the dividends-received deduction contrary to legislative intent.

Specifically, the final regulations deny in whole or in part the Section 245A deduction for certain dividends received to U.S. persons from foreign corporations under Section 245A and the exception to Subpart F income under Section 954(c)(6) for certain dividends received by controlled foreign corporations. The final regulations adopt proposed regulations published in June 2019, and withdraw temporary regulations issued simultaneously with the prior proposed regulations. They apply to tax years ending on or after June 14, 2019. For more details on the temporary regulations, see our story “Temporary regs address Section 245A loophole.”

The new proposed 2020 regulations, issued in conjunction with the final regulations, coordinate the extraordinary disposition rules under the final Section 245A regulations and the disqualified basis rules under Section 951A. They apply for tax years beginning on or after Aug. 27, 2020, the date the final regulations were published in the Federal Register.

Taxpayers may apply both the final and new proposed regulations retroactively, provided the regulations are applied consistently. Final and proposed regulations also were issued under Section 6038 related to information reporting to facilitate administration of the final regulations.

Contacts:
David Sites
Partner
Washington National Tax Office
T +1 202 861 4104

Cory Perry
Senior Manager
Washington National Tax Office
T +1 202 521 1509

Yasmin Dirks
Manager
Washington National Tax Office
T +1 202 521 1506

Olivia Arnold
Manager
Atlanta Office
T +1 678 515 2490

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.