Notice 2009-07 designates a Transaction of Interest and outlines the disclosure requirements for situations where a domestic partnership is used to prevent the inclusion of subpart F income. The notice also indicates that these structures may be challenged under current regulatory authority or judicial doctrines.
The notice describes the transaction as one in which a U.S. taxpayer owns controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership takes the position that subpart F income of the lower-tier CFC or an amount determined under section 956(a) of the Internal Revenue Code (Code) related to holdings of United States property by the lower-tier CFC does not result in income inclusions under section 951(a) for the U.S. taxpayer.
The Notice states that the RS and Treasury Department believe this transaction (which includes taking the position that the U.S. taxpayer has no income inclusion under section 951(a)) has the potential for tax avoidance or evasion, but lack enough information to determine whether the transaction should be identified specifically as a tax avoidance transaction. This notice identifies this transaction and substantially similar transactions as transactions of interest for purposes of § 1.6011-4(b)(6) of the Income Tax Regulations and sections 6111 and 6112 of the Code. This notice also alerts persons involved in these transactions to certain responsibilities that may arise from their involvement with these transactions.
Notice 2009-07 will appear in IRB 2009-3 dated Jan. 20, 2009.
Posted by Lewis J. Saret, General Editor, Wealth Strategies Journal.
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