Form 8832 Check-the-Box Entity Elections Under Section 7701: Selecting Entities for Foreign Operations

Numerous provisions make it necessary for tax advisers to determine which entity structure provides the best after-tax result for U.S. owners. Because the Internal Revenue Code, not the business situs country's laws, govern the tax classification and treatment of a U.S. taxpayer's foreign business holdings, tax advisers to small businesses engaged in cross-border activities should evaluate whether their entity structure is optimal from a U.S. tax standpoint.

Section 7701 provides default classification rules for eligible entities but allows the entity to determine how it is classified for U.S. tax purposes. A foreign entity subject to U.S. tax must make its initial election when it becomes relevant, i.e., when it impacts the U.S. tax liability of any person for either payment or informational return purposes. Taxpayers elect the tax treatment of their foreign business by completing Form 8832, Entity Classification Election, under the check-the-box provisions of Section 7701.

The general rule requires a taxpayer to wait five years after making an entity selection before changing the tax treatment of the foreign entity. However, Treas. Reg. 301.7701-3 allows specific exceptions to the 60-month rule for entity selection. Tax advisers must know the practical aspects of the check-the-box rules to ensure both flexibility and tax efficiency for U.S. taxpayers engaging in foreign business.

Listen as our expert panel provides thorough and practical guidance on the check-the-box regulations of Section 7701 and completing the entity classification election on Form 8832.

1. The U.S. Check-the-Box Regulations - Background
2. Basic Entity Classification Rules for Foreign Entities owned by U.S. Persons
3. The Greatly Increased U.S. Tax Stakes for US Persons in Selecting the FORM of a Foreign Entity
4. Advanced Tax Considerations (and Modeling) in Foreign Entity Selection Process
5. Completing IRS Form 8832 and late elections
6. Advanced Entity Selection considerations in light of Recently finalized U.S. Anti-Hybrid §267A Regs and foreign anti-hybrid rules

The panel will discuss these and other vital issues:

• The implications of using check-the-box elections to pull foreign-source income out of Subpart F treatment
• Retroactive entity selection and completing Form 8832
• How to determine whether a foreign entity is relevant for U.S. taxation purposes
• The impact of tax law changes on check-the-box elections and tactics to maximize tax savings

Learning Objectives

After completing this course, you will be able to:

• Determine whether a foreign entity is relevant for U.S. tax purposes
• Establish planning techniques for check-the-box elections post-tax reform
• Identify relevant tax issues regarding initial entity selection
• Recognize issues associated with managing the entity status of foreign holdings and potential reclassification

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, supervising other preparers/accountants, preparing complex corporate tax forms and schedules. Specific knowledge of rules governing corporate entity structuring, and federal income tax treatment of business entities. Familiarity with Subpart F rules and concepts of cross-border tax arbitrage and hybrid entities.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).