Navigating the New Regulations for Inherited IRAs
Navigating the complexities of inherited IRAs, particularly in light of the shorter distribution periods of the SECURE Act, is akin to steering a vessel through foggy waters.
The IRS issued Notice 2023-55 on July 21, effectively allowing taxpayers temporary relief from the new provisions to the Foreign Tax Credit that were issued under Treasury Decision 9959. The Treasury Decision was issued in 2022, changing provisions of the Tax Code (§§901 and 903 in particular) pertaining to the Foreign Tax Credit. Notably, creditability and attribution requirements for the Foreign Tax Credit changed, which would result in instances where some foreign taxes that would have qualified for the tax credit before the changes would no longer qualify under the amended regulations.
To address the concerns and questions regarding the Foreign Tax Credit changes, the IRS allowed temporary relief for taxpayers seeking to claim the Foreign Tax Credit, giving them the option to use the pre-Treasury Decision 9959 rules in determining eligibility for the Foreign Tax Credit. Otherwise, taxpayers may follow the new Treasury Decision 9959 rules. However, gross receipts or income from digital services will continue to not satisfy the net income requirement, unless the foreign tax is based on gross receipts or income consisting solely of investment income deriving from a trade or business, or wages.
This relief period applies to Tax years beginning on or after December 28, 2021 and ending before December 31, 2023. Due to remaining questions on applicability of the Treasury Decision and requests to the IRS for additional guidance, there are requests that the relief period under Notice 2023-55 be extended beyond tax years ending December 31, 2023. While the IRS has not yet extended the relief period, section 2 of Notice 2023-55 does state that the Treasury Department and the IRS are considering whether “to provide additional temporary relief beyond the relief period.” Practitioners should continue to monitor the situation in order to effectively plan for clients who may be impacted by the Foreign Tax Credit changes in tax years after December 31, 2023.
By Chris Korban, CPA
Tax Materials Specialist, U of I Tax School
Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact taxschool@illinois.edu if you have more up-to-date, supported information and we will create an addendum.
University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.
