As part of LB&I's knowledge management efforts, Practice Units are developed through internal collaboration and serve as both job aids and training materials on tax issues. For example, Practice Units provide IRS staff with explanations of general tax concepts as well as information about a specific type of transaction. Practice Units will continue to evolve as the compliance environment changes and new insights and experiences are contributed. Please visit this site periodically for new and updated Practice Units which are shared below. To provide feedback on a specific Practice Unit, please send an email to LBI Practice Unit Public Feedback and specify the Practice Unit’s name and Document Control Number (DCN), which are both listed on the Practice Unit’s cover page. Please do not reference a specific individual or entity in your email as comments may be subject to future release. The IRS does not commit to respond to suggestions or comments. 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References to third party service providers and documents, like news or journal articles, are for informational purposes only and do not constitute an endorsement of any vendor, document, or the services or views offered by such third party. 2020 09-30-2020 Cost Sharing Arrangements With Stock Based Compensation PDF 228KB 09-17-2020 Overall Foreign and Domestic Losses PDF 329KB 09-15-2020 Introduction to Dollar Value LIFO PDF 516KB 09-09-2020 Foreign Earned Income Exclusion - Audit Techniques PDF 218KB 08-25-2020 Foreign Earned Income for Purposes of IRC 911 PDF 103KB 08-19-2020 LIFO Pooling Requirements PDF 125KB 08-19-2020 Taxability of Distributions Not From Accumulated Earnings & Profits PDF 255KB 08-13-2020 Computation and Review of IRC 986(c) Gain or Loss -Pre-TCJA PDF 226KB 07-29-2020 Receipt of Dividends or Interest from a Related CFC PDF 182KB 07-17-2020 FTC Limitation and Computation PDF 70KB 07-14-2020 IRC 179D Energy Efficient Commercial Buildings Deduction PDF 284KB 07-14-2020 Distributions with Accumulated Earnings & Profits PDF 479KB 07-14-2020 General Overview of Distributions and Accumulated Earnings & Profits PDF 321KB 07-14-2020 Property Distribution PDF 395KB 07-14-2020 Adopting LIFO PDF 94KB 07-14-2020 LIFO Conformity for U.S. Corporations with Foreign Subsidiaries Using LIFO PDF 93KB 07-14-2020 LIFO Conformity PDF 60KB 05-26-2020 Taxation on the Disposition of USRPI by Foreign Persons PDF 282KB 05-08-2020 IRC 481(a) Adjustments for IRC 263A Accounting Method Changes PDF 297KB 05-08-2020 Foreign Earned Income Exclusion Adjustment PDF 72KB 05-08-2020 Overview of IRC 986(c) Gain or Loss Prior to Tax Cuts and Jobs Act of 2017 PDF 167KB 05-08-2020 Official Versus Free Market Exchange Rate PDF 88KB 04-28-2020 Installment Method PDF 159KB 04-28-2020 Substantiation Requirements PDF 86KB 04-28-2020 Foreign Currency Translation PDF 166KB 04-10-2020 Overview of Statute of Limitations on the Assessment of Tax PDF 131KB 04-07-2020 Adjustments for Overwithholding on Form 1042 PDF 2637KB 03-10-2020 How to Compute the AMT FTC PDF 108KB 02-07-2020 Interest Capitalization for Self-Constructed Assets PDF 707KB 01-28-2020 Overview of the Enhanced Oil Recovery Tax Credit PDF 362KB 01-22-2020 FDAP Payments -Statistical Sampling and Projection Procedures PDF 238KB 2019 11-06-2019 Examining a Taxpayer Electing a Partial Disposition of a Building PDF 345KB 10-21-2019 Evaluation of Withholding Agent’s Electronic Books and Records on Reliability of Forms W-8 PDF 154KB 09-06-2019 French Foreign Tax Credits PDF 126KB 07-31-2019 Source of Income for Nonresident Alien Individuals PDF 133KB 06-13-2019 Allocation of Success-Based Fees in a Covered Transaction (PDF PDF) 187KB 05-10-2019 Transaction Costs in a Corporate Separation PDF 275KB 04-30-2019 Shipping and Air Transport Article Overview PDF 100KB 04-05-2019 Land Developers and Subcontractors -Proper Method of Accounting PDF 122KB 04-05-2019 Tax Home for Purposes of IRC Section 911 PDF 79KB 03-21-2019 Competent Authority Revenue Procedure 2015-40 Guidance: Foreign-Initiated Adjustment(s) PDF 222KB 03-15-2019 Introduction to Traditional Automatic Exchange of Information PDF 73KB 03-08-2019 Competent Authority Process Under a MAP Article of a U.S. Income Tax Treaty PDF 246KB 02-26-2019 Self-Employment Tax and Partners PDF 122KB 01-29-2019 Creation of a Permanent Establishment (PE) through the Activities of a Dependent Agent in the United States PDF 162KB 01-29-2019 Preparatory and Auxiliary Treaty Exception to Permanent Establishment Status PDF 120KB 2018 11-05-2018 Identifying a Taxpayer Electing a Partial Disposition of a Building PDF 131KB 09-06-2018 Determining an Individual’s Residency for Treaty Purposes PDF 320KB 07-18-2018 Examining a Transaction Costs Issue PDF 212KB 05-14-2018 ASC 730 Research and Development - How It Relates to IRC 41 and 174 PDF 196KB 05-14-2018 ASC 730 Directive - Computing Qualified Research Expenses PDF 297KB 05-14-2018 Disposition of Nonfunctional Currency PDF 221KB 04-30-2018 Losses Claimed in Excess of Basis PDF 457KB 04-30-2018 Examining the Qualifying Advanced Energy Project Credit PDF 222KB 04-17-2018 Exhaustion of Administrative Remedies PDF 174KB 04-12-2018 General Deductions of a Foreign Corporation Engaged in U.S. Trade or Business (Non Treaty) PDF 151KB 04-12-2018 Reduced Foreign Taxes Under Treaty Provisions PDF 104KB 03-08-2018 Valid Shareholder Debt Owed by S Corporation PDF 130KB 02-28-2018 Functional Currency of a QBU PDF 144KB 02-08-2018 Definition of Foreign Personal Holding Company Income and the Common Exceptions PDF 160KB 02-02-2018 Adjustments to Debt Basis PDF 564KB 01-11-2018 Stock Basis Ordering Rules PDF 86KB 01-10-2018 U.S. Territories - Self-Employment Tax PDF 90KB 01-02-2018 Substantial Contribution Test for CFC Manufacturing Exception PDF 169KB 2017 12-14-2017 Initial Stock Basis PDF 108KB 12-13-2017 Calculation of the IRC 956 Inclusion PDF 316KB 12-7-2017 Employee Share of Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad PDF 105KB 12-7-2017 U.S. Persons Residing Abroad Claiming Additional Child Tax Credit PDF 152KB 11-21-2017 Common Ownership or Control Under IRC 482 - Inbound PDF 191KB 11-21-2017 Common Ownership or Control Under IRC 482 - Outbound PDF 205KB 11-20-2017 Adjustments to Stock Basis PDF 186KB 11-06-2017 Advance Pricing Agreement for Tangible Goods Transactions –Inbound PDF 386KB 11-06-2017 Advance Pricing Agreement for Tangible Goods Transactions –Outbound PDF 319KB 10-19-2017 Overview of Withholding Under FIRPTA for Sales by Individuals PDF 151KB 10-17-2017 Overview of Entity Classification Regulations (a/k/a Check-the-Box) PDF 186KB 10-17-2017 U.S. Real Property Holding Corporations - USRPHC Status PDF 136KB 10-10-2017 Failure to File the Form 5471 – Category 2 and 3 Filers – Monetary Penalty PDF 259KB 09-15-2017 Competent Authority Revenue Procedure 2015-40 Guidance: U.S.-Initiated Adjustment(s) PDF 325KB 09-15-2017 High Value Services: Technical and Marketing Fees – Inbound PDF 261KB 09-14-2017 Creditable Foreign Taxes PDF 117KB 09-14-2017 Sourcing of Income PDF 253KB 09-14-2017 Verifying Refund Requests of IRC 1441 Withholding on FDAP Income PDF 242KB 06-16-2017 The Meaning of “Substantially Complete” with Reference to International Information Return Penalties PDF 144KB 06-06-2017 Functional Currency Determination PDF 118KB 04-24-2017 Physical Presence Test for Purposes of Qualifying for IRC 911 Tax Benefits PDF 173KB 04-21-2017 Overview – Expense Allocation/Apportionment in Calculation of the IRC 904 FTC Limitation PDF 181KB 04-11-2017 FTC General Principles PDF 138KB 03-01-2017 Summary of Foreign and Domestic Loss Impacts on the Foreign Tax Credit PDF 185KB 02-14-2017 Hedge Fund Basics PDF 179KB 02-14-2017 Monetary Penalties for Failure to Timely File a Complete and Accurate Form 8865 – Category 1 & 2 Filers PDF 277KB 01-31-2017 Basket Transactions PDF 194KB 01-30-2017 Exchange Gains/Losses on Payables and Receivables Denominated in a Nonfunctional Currency PDF 164KB 01-30-2017 Sourcing of Exchange Gains or Losses in Currency Transactions PDF 120KB 01-30-2017 How to Assess Penalties for Failure to File Form 8886 Disclosing IRC 988 losses PDF 191KB 01-30-2017 Using an IRC 6038A Summons when a U.S. Corporation is 25% Foreign Owned PDF 437KB 01-04-2017 IRC 367(d) Transactions in Conjunction with Cost Sharing Arrangements (CSA) PDF 386KB 2016 11-14-2016 Self-Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad PDF 114KB 11-08-2016 Portfolio Debt Exemption – Requirements and Exceptions PDF 223KB 10-13-2016 Identifying Foreign Goodwill or Going Concern PDF 544KB 09-23-2016 Sourcing of Multi-Year Compensation Arrangements Including Stock Options for FTC Limitation PDF 139KB 09-23-2016 Comparison of the Arm’s Length Standard with Other Valuation Approaches – Outbound PDF 117KB 09-23-2016 Comparison of the Arm’s Length Standard with Other Valuation Approaches – Inbound PDF 116KB 08-19-2016 Calculating Foreign Earned Income Exclusion – Partner in a Partnership with Foreign Earned Income PDF 311KB 08-19-2016 Foreign Housing Deduction (IRC 911) PDF 255KB 07-20-2016 Overview of Qualified Business Units (QBUs) PDF 460KB 07-20-2016 Overview of IRC Section 988 Nonfunctional Currency Transactions PDF 525KB 07-20-2016 Character of Exchange Gain or Loss on Currency Transactions PDF 175KB 07-15-2016 FDAP Payments – Source of Income PDF 115KB 07-08-2016 Foreign Housing Exclusion (IRC § 911) PDF 240KB 07-05-2016 Corporate Inversions - Overview of Major Issues PDF 292KB 06-14-2016 Failure to File the Form 926 – Return by a U.S. Transferor of Property to a Foreign Corporation – Monetary Penalty PDF 398KB 06-02-2016 FDAP Withholding Under Chapter 3 PDF 260KB 05-12-2016 Taxpayer’s Affirmative Use of IRC 482 PDF 214KB 04-06-2016 Three Requirements of IRC 482 PDF 246KB 03-18-2016 Inbound Resale Price Method Routine Distributor PDF 264KB 03-18-2016 Computing Foreign Base Company Income for US Individual Shareholders PDF 185KB 03-17-2016 Concepts of Foreign Personal Holding Company Income PDF 157KB 03-17-2016 Verifying Refund Request of IRC 1445 Withholding on Dispositions of U.S. Real Property Interests PDF 265KB 03-14-2016 Interest Expense Limitation Computation under §163(j) PDF 354KB 03-09-2016 Allocation and Apportionment of Deductions for Nonresident Alien Individuals PDF 3,732KB 03-09-2016 FDAP Income PDF 322KB 03-07-2016 Residual Profit Split Method - Outbound PDF 395KB 03-04-2016 Review of Transfer Pricing Documentation by *Outbound Taxpayers PDF 529KB 03-04-2016 Outbound Services by US Companies to CFCs PDF 247KB 02-19-2016 Outbound Transfer of Foreign Stock Followed by Check-The-Box Election PDF 351KB 02-19-2016 Residual Profit Split Method - Inbound PDF 381KB 02-19-2016 Revenue Procedure 99-32 Inbound Guidance PDF 443KB 02-19-2016 Interest Expense of a Foreign Corporation Engaged in a U.S. Trade/Business (Non-Bank, Non-Treaty) PDF 291KB 02-19-2016 Gross Effectively Connected Income (ECI) of a Foreign Corporation (Non-Treaty) PDF 225KB 02-19-2016 Interest Expense of US Branch of a Foreign Bank Non-Treaty PDF 254KB 02-19-2016 Calculating the Net Adjustment Penalty for a Substantial Valuation Misstatement PDF 330KB 02-12-2016 Non-Services FDAP Income PDF 300KB 02-08-2016 Outbound Transfer of Domestic Stock PDF 325KB 02-08-2016 Pricing of Platform Contribution Transaction (PCT) in Cost Sharing Arrangements (CSA) Acquisition of Subsequent IP PDF 334KB 02-04-2016 Outbound Transfer of Foreign Stock PDF 417KB 02-04-2016 Change in Participation in a Cost Sharing Arrangement (CSA) – Controlled Transfer of Interest and Capability Variation PDF 411KB 01-21-2016 Concepts of Foreign Base Company Sales Income PDF 418KB 01-20-2016 Overview of Exchange of Information Programs PDF 137KB 01-20-2016 Types of EOI Exchanges PDF 152KB 01-20-2016 Field Procedures for Handling Foreign Initiated “Specific” Requests under EOI Agreements PDF 189KB 2015 12-01-2015 Basic Offshore Structures Used to Conceal U.S. Person’s Beneficial Ownership of Foreign Financial Accounts and Other Assets PDF 372KB 12-01-2015 Defining the Entity – Foreign Trusts PDF 453KB 12-01-2015 Foreign Grantor Trust Determination – Part II – Sections 671-678 PDF 675KB 12-01-2015 Foreign Grantor Trust Determinations – Part I – Section 679 PDF 673KB 11-23-2015 Failure to File the Form 3520/3520-A - Penalties PDF 210KB 11-23-2015 Failure to File the Form 8865 – Category 1 and 2 Filers – Monetary Penalty PDF 308KB 11-23-2015 Foreign Partnership – Taxation PDF 289KB 11-13-2015 Overview of Subpart F Income for U.S. Individual Shareholders PDF 265KB 11-12-2015 Failure to File the Form 5471 – Category 4 and 5 Filers – Monetary Penalty PDF 335KB 11-12-2015 Determination of U.S. Shareholder and CFC Status PDF 245KB 11-04-2015 License of Intangible Property from U.S. Parent to a Foreign Subsidiary PDF 268KB 11-04-2015 Deemed Annual Royalty Income Under IRC 367(d) PDF 321KB 10-29-2015 Definition of Appropriate Exchange Rate Overview PDF 184KB 10-29-2015 Sale by CFC to Unrelated Parties of Products Manufactured by Branch PDF 225KB 10-29-2015 Identification of a U.S. Trade or Business of a Nonresident Alien PDF 199KB 10-29-2015 Conducting Functional Analysis for Foreign Base Company Income (FBCI) PDF 168KB 10-29-2015 Concepts of Foreign Base Company Services Income PDF 200KB 10-29-2015 Branch Rules for Foreign Base Company Sales Income PDF 222KB 10-29-2015 Branch Sales to Unrelated Parties of Products Manufactured by CFC PDF 216KB 10-22-2015 Monetary Penalties for Failure to Timely File a Substantially Complete Form 5471 --Category 4 & 5 Filers PDF 454KB 10-22-2015 Using an Authorization of Agent when a US Corporation is 25% Foreign Owned PDF 400KB 10-22-2015 Using Alternative Means to Obtain Foreign Based Evidence PDF 338KB 10-01-2015 Treaty Exemption of Income from Teaching PDF 348KB 09-10-2015 Inbound Liquidation of a Foreign Corporation into a U.S. Corporate Shareholder PDF 421KB 09-09-2015 Accounting for Intangibles and Services Associated with the Sale of Tangible Property - Outbound PDF 371KB 08-28-2015 Foreign-To-Foreign Transactions – IRC 367(b) Overview PDF 457KB 08-28-2015 Overview of IRC 482 PDF 485KB 08-21-2015 Short Term Loan Exclusion from United States Property PDF 350KB 08-21-2015 Bona Fide Residence Test for Purposes of Qualifying for IRC § 911 Tax Benefits PDF 187KB 08-21-2015 Calculating Foreign Earned Income Exclusion -Self-Employed Individual PDF 188KB 08-21-2015 Sourcing of Fringe Benefits for FTC Limitation PDF 316KB 08-21-2015 U.S. Territories – Determining Bona Fide Residency Status PDF 275KB 08-21-2015 Sourcing of Salary and Compensation PDF 278KB 08-21-2015 Calculating Foreign Earned Income Exclusion -Employee PDF 174KB 08-21-2015 Payee Documentation for Treaty Benefits PDF 360KB 08-21-2015 Effectively Connected Income (ECI) PDF 183KB 08-04-2015 Branch-Level Interest Tax Concepts PDF 776KB 07-17-2015 CFC Purchased From Related Party with Same Country Sales PDF 250KB 07-17-2015 CFC Sale to Related Party With Same Country Unrelated Party Manufacturing PDF 246KB 2014 12-15-2014 Interest Income Derived by CFC or QBU Engaged in Banking Financing or Similar Business PDF 548KB 12-15-2014 Computing Foreign Base Company Income PDF 287KB 12-15-2014 Subpart F Overview PDF 279KB 12-15-2014 Disposition of a Portion of an Integrated Hedge PDF 430KB 12-15-2014 Asset Valuation using the FMV Method for Interest Expense Allocation to Calculate FTC Limitation PDF 350KB 12-15-2014 Overview of Interest Expense Allocation and Apportionment in Calculation of the FTC Limitation PDF 217KB 12-15-2014 Exhaustion of Remedies PDF 566KB 12-15-2014 Exhaustion of Remedies and Transfer Pricing PDF 611KB 12-15-2014 Exhaustion of Remedies in Non Transfer Pricing Situations PDF 632KB 12-15-2014 How to Allocate and Apportion Research and Experimental Expenses PDF 216KB 12-15-2014 Issuing a Formal Document Request when a US Taxpayer is Unresponsive to an IDR PDF 503KB 12-15-2014 Section 861 Home Office and Stewardship Expenses PDF 374KB 12-15-2014 License of Foreign Owned Intangible Property by US Entity PDF 334KB 12-15-2014 Management Fees PDF 331KB 12-15-2014 Purchase of Tangible Goods from a Foreign Parent CUP Method PDF 711KB 12-15-2014 CPM Simple Distributor Inbound PDF 354KB 12-15-2014 Foreign Shareholder Activities and Duplicative Services PDF 511KB 12-15-2014 Best Method Determination for an Inbound Distributor PDF 567KB 12-15-2014 Services Cost Method Inbound Services PDF 293KB 12-15-2014 Arms Length Standard PDF 600KB 12-15-2014 Outbound Liquidation of US Corp to Foreign Parent IRC Section 367 e 2 Overview PDF 1,038KB 12-15-2014 Comparability Analysis for Tangible Goods Transactions Inbound PDF 541KB 12-15-2014 Review of Transfer Pricing Documentation by Inbound Taxpayers PDF 454KB 12-15-2014 Pricing of Platform Contribution Transaction in Cost Sharing Arrangements Initial Transaction PDF 478KB 12-15-2014 Cost Sharing Arrangements vs Licensing Alternative PDF 442KB 12-15-2014 Distinguishing Between Sale License and other Transfers of Intangibles to CFCs by US Transferors PDF 509KB 12-15-2014 Sale of Tangible Goods from a CFC to a USP CUP Method PDF 360KB 12-15-2014 CPM Simple Distributor Outbound PDF 534KB 12-15-2014 Revenue Procedure 99-32 Outbound Guidance PDF 707KB 12-15-2014 Outbound Transfers of Property to Foreign Corporation - IRC Section 367 Overview PDF 788KB 12-15-2014 Dual Consolidated Losses Overview PDF 838KB 12-15-2014 Comparability Analysis for Tangible Goods Transactions Outbound PDF 435KB 12-15-2014 Determining Tax Residency Status of Lawful Permanent Residents PDF 450KB 12-15-2014 Substantial Presence Test PDF 498KB 12-15-2014 Election under Section 6013g PDF 348KB 12-15-2014 Election under Section 6013h PDF 434KB 12-15-2014 First Year Election under 7701b4 PDF 471KB 12-15-2014 IRC 911 Election and Revocation PDF 100KB 12-15-2014 Branch Profits Tax Concepts PDF 543KB 12-15-2014 Qualification for Treaty Benefits under the Publicly Traded Test PDF 608KB 12-15-2014 Creation of a Permanent Establishment through the Activities of Seconded Employees in the United States PDF 702KB 12-15-2014 Overview of FDAP PDF 306KB