LB&I: International “practice units” guidance in 10 areas

LB&I: International “practice units”

The IRS today publicly released 10 new “practice units”—i.e., training aids intended to describe for IRS agents leading practices for specific international and transfer pricing issues and transactions.


Related content

The 10 new practice units (showing a release date of August 21, 2015) are available on the IRS practice unit webpage and are listed as follows:

  • Short-term loan exclusion from United States property
  • Bona fide residence test for purposes of qualifying for IRC section 911 tax benefits
  • U.S. persons residing abroad claiming additional child tax credit
  • Calculating foreign earned income exclusion – Self-employed individual
  • Sourcing of fringe benefits for FTC limitation
  • U.S. territories – Determining bona fide residency status
  • Sourcing of salary and compensation
  • Calculating foreign earned income exclusion – Employee
  • Payee documentation for treaty benefits
  • Effectively connected income (ECI)

Implications for taxpayers

Taxpayers currently under IRS examination or with an examination pending—particularly if a challenge to the taxpayer’s transfer pricing treatment or to a particular transaction is expected—might find it helpful to review the pertinent practice units.

The practice units identify areas of strategic importance to the IRS, provide insight as to how examiners may approach various transactions, and can provide an understanding of the context in which an examiner is approaching a particular issue or transaction.The practice units often discuss the theories and legal authorities for examiners to rely upon when challenging a particular transaction, and identify documents an examiner will request and review. The practice units also explain the relevance of what is being reviewed in order to allow the examiner to fully understand a particular transaction and the position taken by a taxpayer.

At the time of the release of the initial set of practice units in December 2014, the then-Deputy Commissioner (now Commissioner) of the LB&I Division indicated that some 100+ additional practice units were in the review and release pipeline.


Read a March 2015 KPMG report [PDF 176 KB] describing the practice units issued as of March 2015.

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