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IRS Tweaks Tax Rules for Offshore Insurers, Investors

Dec. 4, 2020, 8:15 PM

The IRS and Treasury Department rejected some suggestions and adopted others for changing a proposal for U.S. investors in offshore hedge funds and insurance companies, in a newly released rules package.

Treasury rewrote rules that determine if shareholders of offshore insurance companies face punitive U.S. taxes in proposed rules (REG-111950-20, RIN: 1545-BP91) issued Friday—under tax code Sections 1291, 1297, and 1298. A test under the rules has the potential to subject more entities to passive foreign investment company (PFIC) status, which would force U.S. shareholders to choose between accelerating distributions and paying capital gains taxes, or paying ...