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This article applies to:

  • Product: ONESOURCE Income Tax
  • Return type: international

Beginning Balances - E&P and Taxes for Tax Year 2009 and Earlier

Use the
Beginning Balances - E&P and Taxes
 screens to enter historical balances of E&P and tax pools and layers. Current year adjustments to these balances and the U.S. Dollar equivalents for previously taxed income are also entered on this screen. The information is necessary for the system to properly calculate deemed paid credits and any exchange gain or loss on the distribution of PTI.
The Pre-87 and Post-86 screens have fields which are common to both and described as follows.
FIELD
Use
Tax Year Begin
This date marks the beginning of the entity's tax year for which the Earnings and Profits and Tax layers are being reported. Enter the Tax Year Beginning date in this field using MM/DD/ YYYY format.
Tax Year End
This date marks the end of the entity's tax year for which the Earnings and Profits and Tax layers are being reported. Enter the Tax Year Ending date in this field using MM/DD/YYYY format.
Basket
Select a system-defined separate limitation category or user-defined basket from the dropdown.
Section 959(c) Class
The Section 959(c) class designates whether the Earnings and Profits have been previously taxed, either as 959(c)(1)(A) or (B) - Investments in U. S. Property, 959(c)(2) - Subpart F income, or 959(c)(3) - other earnings and profits (excluded from previous Subpart F taxation).
Own/Sub
The Own/Sub indicator identifies whether this earnings and profits layer is attributable to the earnings and profits of this entity (Own) or to the earnings and profits of a subsidiary of this entity (Sub).

Entering Pre-87 Data

The
Pre-87
 tab uses different columns for entering E&P and Taxes. These columns are described in the table below.
FIELD
Use
Remaining E&P Layer
Enter the functional currency earnings and profits that have not been distributed for the basket and year.
Previously Distributed E&P
Enter the functional currency earnings and profits that have been previously distributed for the basket and year.
Total E&P Layer
The Total E&P Layer amount is automatically calculated as the sum of the Remaining E&P Layer and the Previously Distributed E&P amounts.
Remaining Tax Layer
Enter the functional currency tax layer amount that has not been distributed for the basket and year.
Previously Distributed Taxes
Enter the functional currency tax layer amount that has been previously distributed for the basket and year.
Total Tax Layer
The Total Tax Layer amount is automatically calculated as the sum of the Remaining Tax Layer and the Previously Distributed Tax amounts.

Manually Entering Post-86 Adjustments

  1. On the TAS navigation tree, select the
    Foreign Entity | Beginning Balances - E&P and Taxes
    .
  2. Select
    Post-86 Earnings and Profits
    .
  3. Expand
    Adjustments
    .
  4. Enter the
    Tax Year - Begin
     date (MMDDYYYY) for the start of the tax year.
  5. Enter the
    Tax Year - End
     date (MMDDYYYY) for the end of the tax year.
  6. Select a
    Basket
     from the list of system and user-defined baskets.
  7. Select the
    Section 959(c) Class
    from the dropdown that designates whether the earnings and profits have been previously taxed.
  8. Select either
    Own
     or
    Sub
     from the dropdown.
  9. Enter the
    E&P Adjustment
     which is the functional currency earnings and profits adjustment that is being made for the basket and year.
  10. If the adjustment is for a class of previously taxed income, enter the
    U.S. Dollar equivalent
    for the adjustment.
  11. Enter the
    U.S. Dollar tax adjustment
     amount that needs to be made for the basket and year.
  12. Enter a description for the adjustment.
  13. Click
    Apply
     then
    OK
     to save the changes and exit.
  14. The data entry for Pre-87 Adjustments is identical to the steps described above, except the year must fall before 1987.

Entering the U.S. Dollar Basis for Previously Taxed Income

  1. On the navigation menu, select
    Foreign Entity > Beginning Balances - E&P and Taxes >
    PTI in US$
    .
  2. Enter the total
    U.S. Dollar
     equivalent.
  3. Click
    Save
     and
    Close
    .

Table of Non-Editable Blue Fields on the PTI in US$

FIELD
Description
Pre-Post TRA86
This is determined by the system based on the information entered in the Post-86 and Pre-87 E&P and tax tabs. Previously taxed income has a Sec 959(c) Class of either 959(c)(1) or 959(c)(2).
Basket
This is supplied by the system based on the information entered in the Post-86 and Pre-87 E&P and tax tabs.
Functional Currency Amount
This represents the accumulation of 959(c)(1) or 959(c)(2) E&P for a specific FTC Type for all years entered in the Pre-87 or Post-86 E&P and tax tabs.

Beginning Balances - E&P and Taxes Tips

  • Use the
    Post-86
     or
    Pre-87
    Adjustment
     tab, if you must make an adjustment to the E&P pools or tax pool. This maintains the historical accuracies of the E&P while allowing for corrections to the pool balances. Any adjustments made in one year will be included with the other beginning balances amounts when a binder is rolled over from one year to the next.
  • When a dividend is paid from a lower tier subsidiary to an upper tier foreign corporation, the system automatically updates the Post-86 and Pre-87 E&P and taxes for that dividend payment. Ending balances for E&P and taxes are rolled forward into the next year.
  • Although Post-86 E&P is treated as a pool during calculations, the system allows you to enter information for specific tax years to facilitate tracking of additions and distributions out of the pool. However, historical E&P and taxes could be input as one aggregate entry instead.
  • If the Section 959(c) class is previously taxed income, then the Earnings and Profits amount must be positive.
  • When entering both Post-86 pools and Pre-87 layers earnings and profits should be entered in the same functional currency as the entity.
  • Enter Post-86 taxes in US Dollars.
  • Enter Pre-87 taxes in functional currency.
  • When entering the US $Basis in PTI, the U.S. dollar amount is the previously taxed income (PTI) translated at the weighted average rate in the year of the Subpart F inclusion or at the year-end rate in the year of the Section 956 inclusion.
  • The amount of exchange gain/loss is computed as the difference between the distribution attributable to PTI translated at the spot rate on the distribution date and the U.S. dollar basis of PTI (prorated shares of the previous inclusion amount of PTI [Total U.S. Dollar previous inclusion amounts * actual dividend from PTI/ Total PTI before distribution]). The detail behind this calculation can be found in the Post 86 or Pre-87 PTI Exchange Gain/Loss Report.

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