Tax Law Updates | New Statutes, Regulations, and Rulings
May 21, 2010
IRS Releases Ruling on Interest Expense Treatment for Foreign Life Insurance Company with US Branch
IRS Legal Memorandum ILM 201013001
ILM 201013001, 11/30/2009
The U.S. Internal Revenue Service (“IRS,” or “Service”) has released a ruling relating to the proper allocation of interest expense of a foreign life insurance company doing business in the U.S. through a branch.
Specifically, the IRS held that the Taxpayer must use the allocation method set forth in section 1.882-5 to determine the interest expense allocable to its U.S. branch for purposes of determining its U.S. income tax liability for its 2001-2002 taxable years. The amount of interest expense allocable to Taxpayer’s U.S. income effectively connected with a trade or business (“U.S. ECI”) is computed by applying the three-step method…
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