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IRC 965 Transition Tax Statement

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Level 2

Hi there. Kindly assist on how to compute this part of IRC 965 Transition Tax Statement please.

LINE 3: TOTAL DEDUCTION UNDER SECTION 965(A)

PTO does not compute it automatically so if someone can give an illustration or a sample computation, it would be much appreciated.

Thank you!

 

 

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4 Replies 4
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Level 15

Which year's return are you preparing?

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Still an AllStar
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Level 2

We are prepping for the year 2017 and 2018

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Level 15

Are you preparing a F.5471 along with that?  If so, you should run the numbers from what you have for the CFC.

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Still an AllStar
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Level 2

Yes, we are prepping F5471 as well so that we had the following:

Total amount required to be included in income by reason of section 965(a) = $228,620

Aggregate foreign cash position, if applicable = $406,494

But we are not sure how to calculate this line based on the following rule:

Total deduction under section 965(c) = ?

"A U.S. shareholder of a DFIC is allowed a deduction for the tax year in which the above rules apply in an amount equal to the sum of: (i) the U.S. shareholder’s 8% rate equivalent percentage of the excess (if any) of: (a) the amount so included as gross income, over (b) the amount of the U.S. shareholder’s aggregate foreign cash position, plus (ii) the U.S. shareholder’s 15.5% rate equivalent percentage of so much of the amount described in item (i)(b) (above) as does not exceed the amount described in item (i)(a) (above). (Code Sec. 965(c)(1))"

 

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