13 Nov

Development of Section 986

In the 1980’s, the IRS was studying the taxation of transactions and operations involving foreign currency.  The IRS realized that these issues were growing, and that they had a limited set of rules in the area.  As a result of advising international clients on these types of transactions, we prepared an outline of a major change that was needed with respect to dividends paid by foreign subsidiaries of U.S. companies. The arguments we presented eventually led the IRS to propose, and Congress to adopt, Section 986 of the Internal Revenue Code, which changed the rules that had been in place for 35 years.