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.

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NOTE: Practice Units are not official pronouncements of law or directives and cannot be used, cited or relied upon as such.  Practice Units provide a general discussion of a concept, process or transaction and are a means for collaborating and sharing knowledge among IRS employees.  Practice Units may not contain a comprehensive discussion of all pertinent issues, law or the IRS's interpretation of current law. Practice Units do not limit an IRS examiner’s ability to use other approaches when examining issues. Practice Units and any non-precedential material (e.g., a private letter ruling, determination letter, or Chief Counsel advice) that may be referenced in a Practice Unit may not be used or cited as precedent. 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
09-17-2020 Overall Foreign and Domestic Losses (PDF) PDF 329KB
09-15-2020 Introduction to Dollar Value LIFO (PDF) PDF 516KB
09-09-2020 Foreign Earned Income Exclusion - Audit Techniques (PDF) 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