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Note From the Editor: November 2019

Editor in Chief Susan R. Lipp discusses this month's issue.

A recent Tax Court decision (Estate of Aaron U. Jones) was a big win for taxpayers and advisors involved in valuation issues. The court approved the tax-affecting of the financial results of a pass-through entity when valuing the entity. In his article on the court’s decision, “Tax Court Takes First Step Towards Tax-Affecting,” p. 17, Espen Robak points out that the Internal Revenue Service can no longer engage in a blanket rejection of this valuation method. But, appraisers who do tax-affect need to provide sufficient justification for doing so. 

This month’s issue also includes our International Practice Committee Report. As the articles illustrate, U.S. shareholders of foreign corporations face certain taxes that have become harder to avoid. For example, the Tax Cuts and Jobs Act (TCJA) repealed the rules on downward attribution, so U.S. shareholders of controlled foreign corporations are no longer protected from the downward attribution of foreign corporate stock from a non-U.S. shareholder, partner or beneficiary to a U.S. corporation, domestic partnership, domestic trust or domestic estate. Carl A. Merino, Dina Kapur Sanna and Seth J. Mersky explain the changes to the law and the tax uncertainty and complexity created by those changes in “Attribution After the TCJA,” p. 54. In a related article, “Repatriation: Deferral and Estate Implications,” p. 52, Lawrence M. Lipoff explains that the TCJA also created a transition tax imposed on specified foreign corporations. Although the taxpayer can defer payment of this tax, new rules state that the tax is immediately due in certain situations. The effect of this change can impact the estate or administration of a domestic client who just owns, directly or pursuant to attribution rules through an estate or trust, stock in a foreign corporation.

Also, some U.S. citizens may be subject to a “dreaded” inheritance tax, even if they become expatriates, as David Roberts and Melvin A. Warshaw explain in their article, “Expatriation as an Out-of-Body Experience,” p. 43.

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