6/8/2023 0 Comments Potential lookthrough entity![]() ![]() ![]() Proposed Regulations provided guidance regarding the scope of the Section 897(l) exemption, the requirements for an entity to qualify as a QFPF, and related withholding tax rules under Sections 14. On June 6, 2019, the Treasury Department and the IRS released proposed regulations under Section 897(l) (“2019 Proposed Regulations”). The PATH Act 4 added Section 897(l) in 2015, which provides a complete exemption from taxation under Section 897 for gain or loss recognized by a QFPF attributable to the disposition of, and certain distributions with respect to, United States real property interests (“USRPIs”). This Legal Update provides a review of certain rules provided in the Final Regulations and the 2022 Proposed Regulations, including comparisons to the prior proposed regulations. 2 On the same day, the Treasury Department and the IRS also proposed regulations clarifying the treatment of QFPFs under Section 892 and making certain changes to the rules surrounding domestically controlled qualified investment entities and related FIRPTA exceptions (“2022 Proposed Regulations”). On December 28, 2022, the Treasury Department and the Internal Revenue Service (“IRS”) released final regulations regarding the Section 897(l) 1 exception from the Foreign Investment in Real Property Tax Act (“FIRPTA”) for qualified foreign pension funds (“QFPFs”) (“Final Regulations”).
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