Pension & Benefits News IRS proposed regs clarify tax rules on U.S. real property sales by foreign pension funds
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Tuesday, July 9, 2019

IRS proposed regs clarify tax rules on U.S. real property sales by foreign pension funds

By Pension and Benefits Editorial Staff

IRS proposed regulations address the exception from federal tax for gain or loss of a qualified foreign pension fund attributable to sales of certain U.S. real property interests (USRPIs). The proposed regulations clarify and modify the conditions under which foreign pension funds are exempt from taxation under Code Sec. 897, by addressing: the entities and organizational structures that are eligible for the foreign pension fund exemption; the nature of the benefits, beneficiaries, and foreign taxation of eligible funds; and the documentation rules that apply to exemptions from withholding taxes otherwise required by Code Secs. 1445 and 1446.

The proposed regulations will apply to dispositions of USRPIs and distributions described in Code Sec. 897(h) occurring on or after the date they are published as final regulations in the Federal Register. However, several proposed provisions apply to dispositions and distributions occurring on or after the date the proposed regulations are filed for public inspection by the Federal Register. These provisions contain definitions that prevent a person that would otherwise be a qualified foreign pension fund or a qualified controlled entity from claiming the tax exemption where the exemption may benefit a person other than a qualified recipient. Taxpayers that consistently and accurately comply with the proposed regulations can rely on them for dispositions or distributions occurring on or after December 18, 2015, and before the applicability date.

SOURCE:  84 FR 26605.

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