Under section 1445(e)(1) and paragraph (c) of this section, a domestic partnership or the fiduciary of a domestic trust or estate is required to withhold tax upon the entity's disposition of a U. real property interest if any foreign persons are partners or beneficiaries of the entity. Finally, under section 1445(e)(3) and paragraph (e) of this section a domestic U. real property holding corporation is required to withhold tax upon certain distributions to interest-holders that are foreign persons.

Paragraph (d) provides rules concerning the requirement of section 1445(e)(2) that a foreign corporation withhold tax upon its distribution of a U. Paragraphs (f) and (g) of this section are reserved to provide rules concerning transactions involving interests in partnerships, trusts, and estates that will be subject to withholding pursuant to sections 1445(e) (4) and (5).

Hedge funds often include offshore entities, especially foreign corporations, in their structures to accommodate foreign investors and domestic tax-exempt entities. This article discusses one of these reporting requirements, U. For the transfer to be exempt from reporting on Form 926, the income from the contribution to the foreign corporation must not be unrelated business income.

investors that invest in hedge funds through foreign corporations and hedge funds that establish foreign corporations must be diligent to ensure that they meet the special reporting and filing requirements that frequently arise when investing in or forming foreign corporations. Generally, the transferor does not need to file Form 926 if the contribution of stock or securities was taxable in the U. and the transferor properly reported the income on a timely filed federal income tax return. Of particular note to certain pension funds and university endowments that invest in hedge funds through foreign corporations, certain contributions by tax-exempt entities including transfers of stock and securities are eligible for an exemption from filing Form 926.

Whether the trust is the product of a bankruptcy plan or a state law plan of dissolution, certain factors must be considered. Section 1123(b)(3)(B) of the Bankruptcy Code allows this prospect to be avoided.

To find out more, Lawyer Monthly hears from Ashley B. It states that a plan may provide for the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such claim or interest.

However, a husband and wife may jointly file a Form 926 assuming that they file their U. The regulations treat a change in governing documents, articles, or agreements of the foreign entity which are done to reflect an election to be treated as a foreign corporation for U. tax purposes as a transfer of property to a foreign corporation in connection with a section 351 exchange.

The 12 month boundary is not limited to a calendar year.

Since the contributions were within 12 months of each other and if, taken together, these two contributions form a reportable transaction, the transferor will have to file Form 926.

Witness the situation described in recent letter from the Internal Revenue Service (LTR 200806006, November 7, 2007), which addresses a seeming anomaly related to the tax code.

The anomaly is corporate dissolution without liquidation.