Paying Tax On Income Never Received: The Moores, The 965 Transition Tax, Foreign Corps and Subpart F

<p>February 3, 2022 - Participants include:</p> <p>Virginia La Torre Jeker - <a href='https://www.twitter.com/vljeker'>@VLJeker</a></p> <p>John Richardson - <a href='https://www.twitter.com/expatriationlaw'>@Expatriationlaw</a></p> <p> </p> <p>Introduction - Describing The Issue</p> <p>The 2017 TCJA contained a provision found in IRC 965 which required the certain US shareholders of foreign corporations to include their share of the corporation's profits as income on the shareholder's tax returns.</p> <p>Significantly:</p> <p>1. The income subject to taxation was never actually received by the individual shareholders; and</p> <p>2. The income required to be included, represented the income of the corporation from 1986 to 2017 (31 years worth of income at once).</p> <p>Commentators have appeared to assume that this retroactive tax affected only multi-nationals. The truth is that it impacted many individual shareholders (including individual Americans abroad). For many Americans abroad their corporations were their pension/retirement plans. The <a href='https://citizenshipsolutions.ca/?s=transition+tax'>965 Transition Tax</a> effectively confiscated their retirement plans and in some cases forced the liquidation of their corporations in order to be able to pay the tax. Of all the indignities and unfairness inflicted on Americans abroad, this was probably the worst.</p> <p>Lawsuit From Abroad - Silver</p> <p>U.S. tax lawyer Monte Silver deserves credit for launching a lawsuit against the Treasury Department which based largely on the procedural aspects of how the Transition Tax was inflicted on  Americans abroad. The Silver lawsuit(s) did not challenge the constitutionality of the Transition Tax per se. The Silver lawsuits challenge was from the perspective of US citizens, living outside the United States, carrying on a business through a corporation that was local to them, but foreign to the United States. I have written about the Silver lawsuit <a href='https://citizenshipsolutions.ca/2019/12/27/part-34-2019-treas