Andrew Mitchel LLC

International Tax Blog - New and Interesting International Tax Issues

3 New Videos – PFIC With No QEF, Pedigreed QEF, & Unpedigreed QEF


Chart showing Stan owning 60% and Betty owning 40% of FC, a foreign corporation

We recently published three new videos. The first video describes a PFIC with no QEF election. The second video describes a PFIC with a QEF election in the first year of the holding period (a pedigreed QEF). The third video describes a PFIC with a QEF election in a year after the first year of the holding period (an unpedigreed QEF).

Here are links to the three videos:

  1. No QEF election
  2. Pedigreed QEF
  3. Unpedigreed QEF
Tags: 1291 PFICs, 1293, 1295 QEFs, Other - Videos

Famous Tax Quotes – The Most Honorable People I Have Ever Dealt With


Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is:

In his new role [the taxpayer] became acquainted with John Glube, EWH’s Canadian attorney. Mr. Glube was the architect behind EWH, which seems to have been structured to enable its European owners to minimize taxes imposed by Canada and their home countries. * * * [The taxpayer] described Mr. Glube and his associates as “the most honorable people I have ever dealt with.” Mr. Glube was later imprisoned for embezzlement.

Harrington v. Commr., T.C. Memo 2021-95.

Tags: Other - Famous Tax Quotes

Section 911 Housing Cost Amounts Updated for 2023



On Tuesday the IRS published Notice 2023-26 which provides adjustments to the limitation on housing expenses for specific locations in 2023.

Code §911(a) allows a qualified individual to elect to exclude from gross income an “Exclusion Amount” related to foreign earned income and a “Housing Cost Amount.” The Exclusion Amount for 2023 is $120,000.

The Housing Cost Amount is generally defined as an amount equal to the excess of (A) the “Housing Expenses” of an individual for the taxable year, over (B) 16% of the Exclusion Amount.

For example, if an individual had Housing Expenses during 2023 of $25,000, the Housing Cost Amount that could be excluded from that individual’s income would be 5,800 (25,000 - [120,000 X 16%]).

Housing Expenses, however, are generally limited to an amount equal to 30% of the Exclusion Amount in effect for the calendar year ($36,000 for 2023). Thus, the maximum Housing Cost Amount for 2023 which is excludible from income would generally be $16,800 ($36,000 - [120,000 X 16%]).

The IRS is authorized to issue guidance to adjust the limit on Housing Expenses based on geographic differences in housing costs relative to housing costs in the United States. Pursuant to this authority, the IRS published Notice 2023-26 to provide adjustments to the limitation on Housing Expenses for high cost locations.

For example, the limitation on Housing Expenses for 2023 in Bangkok, Thailand is $59,000. Therefore, an individual living in Bangkok with housing expenses in 2023 of $59,000 or more could exclude from income an amount of $39,800 ($59,000 - [120,000 X 16%]).

An individual generally qualifies for Code §911 during the period which the individual meets the tax home requirement and either the bona fide residence requirement or the physical presence requirement. If it is the first year or the last year that an individual meets these requirements, the amounts above are prorated for the year accordingly.


Tags: 911 Foreign Earned Income Exclusion, 911 Housing Cost Amounts, Authority - Notices, Form 2555

Famous Tax Quotes - Self-serving, Unreliable, Unverified, and Contradicted Testimony


Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is:

Mrs. Fairbank testified that she does not “know anything about UBS,” did not engage Dr. Lienert or Mr. Besser, and never asked anyone to create Xong Services on her behalf. [FN 35] We are not convinced.

* * *

FN 35 * * * We find Mrs. Fairbank’s testimony to be self-serving, unreliable, unverified, and in contradiction with some of the stipulated documents in this case.

Fairbank v. Commr., T.C. Memo 2023-19.

Tags: Other - Famous Tax Quotes

Musings on Structure Planning For Closely-Held Foreign Entities


Form 5471

  1. General Principles

    1. Many countries, including the US, impose two levels of taxes with respect to corporations. One level of tax is imposed on the corporation, and a second level of tax is imposed on the shareholder.

    2. Therefore, income earned through a foreign corporation owned by a US person can be subject to at least three levels of tax: (1) foreign corporate income tax, (2) foreign shareholder tax (typically a dividend withholding tax), and (3) US shareholder tax.

    3. The US allows a foreign tax credit for income taxes paid by a US person. The ability to claim foreign tax credits can reduce the multiple layers of tax. However, there are many limitations on claiming foreign tax credits. There is no guarantee that double or triple taxation can be avoided in every circumstance.

    4. Dividends from foreign corporations in treaty countries often qualify to be taxed at lower tax rates (qualified dividend income).

    5. Income of a foreign corporation can be deemed distributed to US shareholders, even before the earnings are actually distributed. Deemed distributions are not treated as dividends and therefore do not qualify to be taxed at the reduced rate on dividends.

    6. US individuals generally cannot claim foreign tax credits for foreign income taxes paid by a foreign corporation.

      1. Foreign dividend withholding taxes are generally imposed on the shareholder receiving the dividend. Because the foreign tax in that case is imposed on the shareholder, a US individual shareholder of a foreign corporation can generally claim foreign tax credits for dividend withholding taxes.

    7. US C corporations generally can claim foreign tax credits for foreign income taxes paid by foreign corporations when the earnings of the foreign corporation are deemed distributed to the US C corporation.

      1. US C corporations can generally claim a dividends received deduction for dividends received from foreign corporations out of earnings that have not previously been taxed in the US. If the earnings were previously taxed in the US (due to a prior inclusion), the dividends are generally excluded from the US C corporation’s gross income.

    8. There are generally two types of deemed distributions from foreign corporations:

      1. Subpart F Income inclusions, and

      2. GILTI inclusions.

  2. Entity Classification

    1. Some foreign entities must be classified as corporations for US tax purposes.

    2. Some foreign entities can elect their US tax classification.

    3. If no elections are made, default rules apply to classify the foreign entities.

    4. Foreign entities that provide limited liability protection to their shareholders default to be classified as corporations. That is, foreign LLCs generally default to be classified as corporations for US tax purposes if no entity classification election is made.

    5. Entity classification elections are made on Form 8832. A foreign entity must first obtain a US EIN if it wants to make an entity classification election.

  3. Timing of entity classification elections

    1. It is important to determine the preferred entity classification for the first year in which the foreign entity is formed or acquired.

    2. US owners of foreign entities generally must recognize full gain in order to change classification from corporation to pass-through, or vice versa.

  4. Foreign pass-through entities

    1. If a foreign entity elects to be taxed as a pass-through entity (such as a partnership or a disregarded entity) for US tax purposes, the entity will not be classified as a corporation for US tax purposes.

    2. The US tax classification of a foreign entity generally does not affect the foreign classification of that entity. Thus, a foreign entity that elects to be classified as a partnership for US tax purposes generally would continue to be classified as a corporation for foreign tax purposes.

    3. Income and expense items of foreign pass-through entities flow through to the US owners of those entities. Thus, the US owners are taxed in the current year on their share of the current earnings of the foreign entity.

    4. A significant benefit of pass-through taxation is that foreign income taxes paid by the foreign entity generally can be claimed as foreign tax credits by the US owners. The foreign taxes paid by the foreign entity pass-through to the US owners and can be claimed by the US owners as foreign tax credits on their tax returns.

      1. Not only can foreign income taxes paid by the foreign entity be claimed as foreign tax credits in the US, but foreign dividend withholding taxes can also be claimed as foreign tax credits.

      2. In order to minimize the worldwide effective tax rate, it may be important to properly time distributions from the foreign entity to the US owners (in order to trigger the foreign dividend withholding tax). In other words, it may not make sense to delay distributions of earnings from the foreign pass-through entity.

    5. Foreign pass-through entities are not subject to the Subpart F Income or GILTI rules. However, ordinary income earned by a foreign pass-through entity is taxed to the US owners as ordinary income (i.e., not capital gain and not qualified dividend income).

    6. Foreign pass-through entities typically need to take into consideration the special foreign currency rules with respect to qualified business units (“QBUs”).

      1. These rules are found under Code §987. The IRS has published final regulations under Code §987, but the effective date of those regulations has been postponed for several years. The final regulations are very complicated. Proposed regulations were issued in 1991, and re-proposed regulations were issued in 2006.

      2. It may be possible to rely on the simpler rules in the 1991 proposed regulations until the final regulations are implemented.

    7. Foreign pass-through entities that are classified as disregarded entities and that pay interest expense to foreign persons may be subject to US withholding tax on the interest expense paid.

  5. Losses

    1. Losses of foreign pass-through entities generally flow through to their US owners. There are multiple layers of rules that defer or disallow deductions for losses. Some of these rules are specific to international activities and others are not. The loss limitation rules are not discussed here.

    2. Foreign start-up entities often incur losses in the early years and then turn profitable in later years. Foreign law may allow the foreign entity to carry net operating losses (“NOLs”) forward to future years.

      1. For example, a foreign corporation may lose $100 in each of years 1-3 and then earn $100 in each of years 4-6. On a cumulative basis, the foreign corporation has earned zero net income through year 6. The foreign country may allow NOL carryforwards from years 1-3 to years 4-6 so that no foreign income tax is paid up through year 6.

      2. NOL carryforwards can be an important factor in determining whether the high-tax exception election can be made (see below).

  6. Computation of US taxable income

    1. US corporations and US partnerships often have differences between book income and taxable income (e.g., depreciation methods, reserves, etc.). The book-to-tax differences for corporations are shown on Schedule M-1 of Form 1120.

    2. Similarly, foreign taxable income of a foreign entity must be adjusted to arrive at US taxable income. For example, depreciation methods may differ, etc.

    3. The foreign-to-US income adjustments must be made for both foreign entities classified as corporations and foreign entities classified as pass-throughs.

    4. Because foreign income may differ substantially from US taxable income, it is important to thoroughly understand how the foreign income amounts are being computed (so that the necessary adjustments can be made). US and foreign advisors may need to collaborate to determine the adjustments necessary.

  7. Computing foreign tax credits

    1. If the foreign entity regularly computes its income on an accrual method, then foreign income taxes generally must be accounted for on the accrual method.

    2. Only foreign “income” taxes can be claimed as foreign tax credits. Foreign countries often impose taxes that are not considered income taxes in the US sense.

  8. Debt vs. equity

    1. When funding a foreign entity, a question often arises as to whether it is preferable to fund the foreign operations partly as debt and partly as equity.

    2. The debt vs. equity analysis differs depending on whether the foreign entity is classified as a corporation or as a pass-through entity for US tax purposes.

  9. Foreign corporations

    1. A foreign corporation that is controlled by US shareholders is known as a controlled foreign corporation (“CFC”).

      1. Subpart F Income inclusions and GILTI inclusions only apply to CFCs.

      2. If the foreign corporation is not a CFC because the US owners own less than 50%, the foreign corporation may be a passive foreign investment company (“PFIC”).

      3. If a US owner is taxed on a Subpart F Income or GILTI inclusion in one year and the earnings related to the inclusion are actually distributed to the US owner in a later year, those earnings actually being distributed are generally not taxed a second time in the US (unless a 962 election was made for the inclusion).

    2. Subpart F Income inclusions typically occur when the foreign corporation has investment-type income or has certain transactions with related parties.

      1. Rental income is generally Subpart F Income. An exception applies for rental income if “the [CFC], through its own officers or staff of employees, regularly performs active and substantial management and operational functions while the property is leased.” If the management and operational functions are outsourced to a management company, the rental exception to Subpart F Income generally will not apply.

    3. GILTI inclusions generally apply to most types of income that are not Subpart F Income.

      1. GILTI inclusions are generally reduced by DTIR. DTIR is 10% of the US tax basis of the tangible depreciable property of the CFC. DTIR is generally reduced by interest expense of the foreign corporation.

      2. Typically, most active business income of a CFC results in a GILTI inclusion unless the high-tax exception election applies or another CFC owned by the taxpayer has losses that can offset the income of this CFC.

    4. High-tax exception election

      1. If the foreign corporation’s earnings are subject to a foreign income tax rate of at least 18.9% (which is 90% of the US corporate tax rate of 21%), then the US owner of the CFC can generally elect to avoid the Subpart F Income inclusion or the GILTI inclusion.

      2. The effective tax rate is computed based on the foreign income taxes paid or accrued, divided by the foreign corporation’s earnings after foreign-to-US adjustments.

        1. Therefore, it is not possible to simply focus on the foreign statutory tax rate to determine if the high-tax exception election can be made.

        2. It is necessary to understand the foreign-to-US adjustments to income in order to compute the tax rate.

        3. It is also important to understand that only foreign “income” taxes are considered in computing the effective tax rate. A tax on gross income would generally not be considered an “income” tax and would not be part of the numerator in the effective tax rate calculation.

      3. As described above, start-up companies often have losses in the early years and may have foreign NOL carryforwards. During the loss years, no US tax deduction will be allowed (unless the losses offset the tested income of another CFC), but during the income years, a GILTI inclusion will generally be picked up. If the NOL carryforwards reduce or eliminate foreign income taxes, the high-tax exception election may not be available.

      4. The high-tax exception election can be very helpful when it applies:

        1. The US owners have no Subpart F Income inclusion or GILTI inclusion (which is taxed at ordinary income rates for individuals).

        2. The tax return preparation is much less complicated.

        3. If the foreign tax rate is significantly higher than 18.9% and if there are no significant adjustments from foreign-to-US income, the details of these computations may not be material.

      5. The 18.9% rate is susceptible to change. If the US corporate tax rate were to increase, the percentage also increases. For example, if the US corporate tax rate were to increase from 21% to 28%, then the foreign tax rate needed to meet the high-tax exception would be 25.2% (90% of 28%).

    5. 962 Election for Individuals

      1. If an individual has a Subpart F Income inclusion or a GILTI inclusion, the individual can generally elect to be taxed as if he or she were a US C corporation. The election is made each year and applies to all CFCs.

      2. Because US C corporations can claim foreign tax credits for foreign income taxes paid by the foreign corporation on Subpart F Income and GILTI inclusions, an individual making a 962 election can also claim foreign tax credits for foreign income taxes paid by the foreign corporation with respect to the inclusion.

      3. Making a 962 election can be complicated, and may not only complicate the current year tax forms, but may also complicate future year tax forms. Having said that, at times a 962 election can be very beneficial.

      4. A 962 election is generally more beneficial with respect to a GILTI inclusion (as opposed to a Subpart F Income inclusion) because the Code §250 deduction is allowed with respect to a GILTI inclusion.

  10. Deciding between corporation vs. pass-through

    1. As described above, it is important to determine the preferred entity classification for the first year.

    2. The preferred way to analyze corporation or pass-through treatment of a foreign entity is typically to compute the worldwide effective tax rate (considering both foreign taxes and US taxes) on earnings generated by the foreign entity and then distributed up to the US owners for multiple future years.

    3. This type of analysis generally requires projections of foreign entity earnings, as well as projections of distributions of profits from the foreign entity.

    4. Excel modeling is generally needed. The modeling compares the worldwide effective tax rate of earned and distributed earnings in one or more scenarios where the foreign entity is classified as a corporation for US tax purposes and in one or more scenarios where the foreign entity is classified as a partnership for US tax purposes.

    5. The Excel modeling must consider both foreign taxable income and US taxable income. Therefore, it is necessary to understand the adjustments required to convert projections of foreign taxable income to projections of US taxable income. US and foreign advisors may need to collaborate to determine the adjustments necessary.

  11. US Information Tax Returns (the following is just a partial list)

    1. Foreign corporations:

      1. Form 5471

      2. Form 8992

      3. Form 926

    2. Foreign pass-throughs:

      1. Form 8865 (foreign partnerships)

      2. Form 8858 (foreign disregarded entities)

    3. There are substantial penalties for failing to file various of these forms when they are required to be filed.

    4. These forms have gotten more complicated in recent years.

Tags: 250 GILTI & FDII Deductions, 901 Foreign Tax Credits, 951 Subpart F Income, 951A GILTI, 957 Controlled Foreign Corporation, 960 Deemed Paid Foreign Taxes, 962 Election to be taxed as corporate rates, 987 Branch Transactions

Famous Tax Quotes – “To tautologize, section 741 applies only where it applies”


Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is from Rawat v. Commr., T.C. Memo 2023-14.

In Rawat, the Tax Court held that a partnership should be treated as an aggregate for purposes of Code §751 with respect to “inventory items”. By treating the partnership as an aggregate for this purpose, the inventory sourcing rule in Code §865(b) applied to the gain. If the gain was U.S.-source income, it would be effectively connected income (“ECI”) under the limited force of attraction rule in Code §864(c)(3).

The taxpayer argued that the partnership should be treated as an entity, and not as an aggregate, under Grecian Magnesite v. Commr., 149 T.C. 63 (2017), aff’d, 926 F.3d 819 (D.C. Cir. 2019). The Tax Court held that the partnership should be treated as an entity for purposes of Code §741, but not for purposes of Code §751. To emphasize this distinction, the court stated:

[T]o tautologize, section 741 applies only where it applies. As we have noted, section 741 has an explicit exception: “except as otherwise provided in section 751 (relating to unrealized receivables and inventory items).” Section 751 provides that the “inventory items” portion of proceeds “shall be considered as an amount realized from the sale or exchange of property other than a capital asset”. Section 741, by its own terms, does not apply to the “inventory items” portion addressed by section 751, to which section 741 yields. The singular “capital asset” treatment of section 741 is thus partially disaggregated by section 751.

Tags: Other - Famous Tax Quotes, 861 Source of Income, 864 Engaged in U.S. Trade or Business (ETOB)

IRS Regulations Lowest in 24 Years


The IRS publishes a variety of documents in the Federal Register. These documents include regulations, proposed rules and notices, executive orders, etc.

From 1994 to 2022, the IRS published 13,916 documents in the Federal Register. The total number of pages published during this time was 42,903. Below is a graph showing the number of pages published each year.

As can be seen, the number of pages published in 2022 was the lowest it has been since 1997. In 1997, the IRS published 1,071 pages in the Federal Register, and in 2022 the IRS published 1,097 pages.

Eighteen of the documents published since 1994 were more than 100 pages long. A few of the documents that were over 100 pages include:

Publication Date Title / Link Page Length
2022-01-04 Guidance Related to the Foreign Tax Credit; Clarification of Foreign-Derived Intangible Income 101
2020-09-14 Limitation on Deduction for Business Interest Expense 160
2019-12-17 Foreign Tax Credit Guidance Related to the Tax Cuts and Jobs Act . . . 102
2018-12-28 Limitation on Deduction for Business Interest Expense 121
2016-10-21 Treatment of Certain Interests in Corporations as Stock or Indebtedness 127
2013-01-28 Regulations Relating to Information Reporting by Foreign Financial Institutions . . . 123
1997-10-14 General Revision of Regulations Relating to Withholding of Tax on Certain U.S. Source Income . . . 112

The data to perform this analysis was obtained from the Federal Register API. For example, the link below returns the following information for IRS documents published during the month of December 2022:

  • Publication date,
  • Title,
  • Number of pages, and
  • An HTML link to the document.

December 2022 IRS documents in the Federal Register. (The data is in JSON format, which is best viewed in Edge or Firefox browsers.)

Tags: Authority - Treasury Decisions

Charts Created in 2022


 F reorganzation from TBL Licensing

During 2022 we published 34 new charts. Below are links to the 34 new charts.

  1. Aptargroup, Inc. (U.S. Shareholder Must Characterize Stock of a CFC Under a Consistency Rule)
  2. Aspro, Inc. (Purported Management Fees Were Disguised Dividends)
  3. Martin Ice Cream (Ice Cream Distribution Rights Were Owned By A Shareholder)
  4. TBL Licensing LLC (Gain Recognized on the Transfer of Intangible Property in an Oubound F Reorganization)
  5. Rev. Rul. 67-12 (Business Expenses Paid In a Year After the Termination of the Business Were Deductible)
  6. Rev. Rul. 67-376 (Conversion of Corp to Trust Classified as a Corp (F Reorg))
  7. Rev. Rul. 73-478 (Sale of S Corp Stock to an Alien BFR of PR Terminates S Election)
  8. Rev. Rul. 78-38 (Charitable Contribution Via Credit Card: Deductible in Year Charge Was Made)
  9. Rev. Rul. 78-39 (Medical Expense Via Credit Card: Deductible in Year Charge Was Made)
  10. Reg. 1.301-1(e), Example (Section 301 Distribution Greater Than E&P and Stock Basis)
  11. Reg. 1.903-1(d)(3), Example 3 (Withholding Tax On Royalties; Attribution Requirement (IP Used Worldwide))
  12. Reg. 1.903-1(d)(4), Example 4 (Withholding Tax On Royalties; Attribution Requirement (IP Only Used In-Country))
  13. Reg. 1.958-1(d)(3)(i), Example 1 (U.S. Partnership Owns CFC, With One Partner as a U.S. Shareholder)
  14. Reg. 1.958-1(d)(3)(ii), Example 2 (Tiered U.S. Partnerships Own a CFC)
  15. Reg. 1.1239-1(c)(5), Example 1 (Gain on Sale From Shareholder to Corp Is Ordinary Income)
  16. Reg. 1.1239-1(c)(5), Example 2 (Gain on Sale From Parent to Subsidiary Is Ordinary Income)
  17. Reg. 1.1291-1(b)(8)(iv)(B), Example 2 ("Top-Down" Approach For Ownership of a PFIC Thru Foreign Partnerships)
  18. Reg. 1.1295-1(d)(3)(ii), Example (A QEF Election Only Applies to the Foreign Corporation For Which the Election is Made)
  19. Reg. 1.1295-1(i)(3), Example (QEF Election Automatically Terminated With MTM Election)
  20. Reg. 1.1361-1(g)(1)(ii), Example 1 (U.S. Corp Was Not an S Corp Because NRA Spouse Owned Shares Under Community Property Laws)
  21. Reg. 1.1361-1(g)(1)(ii), Example 2 (U.S. Corp Was an S Corp Because Foreign Spouse Elected to be Treated as a US Resident)
  22. Reg. 1.6013-6(a)(2)(v), Example (If You Make a 6013(g) Election, You Can't Claim You Are a Nonresident Under a Treaty)
  23. Reg. 1.6013-6(c), Example 1 (US Citizen & NRA Spouse Make 6013(g) Election)
  24. Reg. 1.6013-6(c), Example 2 (New US Resident Alien & NRA Spouse Make 6013(g) Election)
  25. Reg. 1.6013-6(c), Example 3 (6013(g) Election Suspended During Intervening NRA Years)
  26. FSA 199909004 (A Foreign Partner In a U.S. Investing Partnership Was Not Engaged In a U.S. Trade or Business)
  27. PLR 200102037 (LLC Owned By Individual And Grantor Trust Was a DRE)
  28. PLR 200335019 (Conversion of Corp to LP and Election to Treat LP as Corp)
  29. PLR 200513001 (S Corp Owned Thru Disregarded LLCs and Disregarded LP)
  30. 861-865 Income Classification
  31. Reg. 1.861-9 and -9T (Interest Expense Allocation Example With An Individual Owning Partnerships)
  32. Reg. 1.1298-4, Example (Possible PFICs Owning 25%-Owned Domestic Corps)
  33. Cheat Sheet: 1.861-9 and 9T (Partnership Interest Expense Allocation Rules for Individuals)
  34. Cheat Sheet: Reviewing Form 5471 for an Individual Owning a CFC With a GILTI Inclusion and no Subpart F Income

A number of charts were also updated in 2022. The list above does not include the updated charts.

Tags: Charts - Situational Charts

2022 Published Expatriates Increases By 57%


Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2022.

The number of published expatriates for the fourth quarter was 1,024, bringing the total number of published expatriates in 2022 to 3,816. The number of expatriates for 2022 is a 57% increase from 2021.

Although the number of expatriates increased by 57% in 2022, the number in 2022 was 43% lower than the number in 2020.

For our prior coverage of expatriation, see all posts tagged Expatriation.

Below are two charts. The first chart shows the annual expatriations from 1998 to 2022. The second chart shows the quarterly expatriations from 2012 to 2022, including an 8-quarter moving average.

Expatriation Chart Annual

Expatriation Chart Quarterly

Tags: 877A Individual Expatriation

Exchange Rates for 2022


Schedule H

Yesterday the IRS published average currency exchange rates for 2022. These average rates are used on Schedules H and M of Form 5471. In addition, the average exchange rates are used to convert local currency Subpart F Income and GILTI tested income amounts into U.S. dollars. Code §989(b)(3).

The average exchange rates are also used to convert GILTI inclusion amounts back into the functional currency of the CFCs. See Form 8992, Schedule A, Column (l) and Treas. Reg. §1.951A-5(b)(3).

The Treasury Department has also published year-end currency exchange rates for 2022. These year-end exchange rates are used on Form 8938 and the FBAR.

Tags: Form 5471, Form 8938, Other - FBAR