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15631: IRC 965 - Transition Tax Statement

1040 Individual Data Entry

How do I make entries related to IRC section 965 in Drake Tax? 

Screen 965 is available starting in Drake17 for entries related to section 965 amounts and elections. This screen is included in the 1040, 1065, and 1120-S packages in Drake17. The form is in development for the 1120 package in Drake18. 

Those who may be required to report section 965 amounts:

  • A person who is a U.S. shareholder of a deferred foreign income corporation (DFIC),
  • A direct or indirect partner in a domestic partnership that is a U.S. shareholder of a DFIC,
  • A shareholder in an S corporation that is a U.S. shareholder of a DFIC, or
  • An owner or beneficiary of another domestic pass-through entity that is a U.S. shareholder of a DFIC. 

Those who are required to report section 965 amounts in 2017 must do so using an IRC 965 Transition Tax Statement, available in Drake17 by completing the 965 screen.

Note: In a 1040, complete the return without making entries on lines 1 through 7 of the transition statement and view the return. The amount on line 63 of Form 1040 must be entered on the line Taxpayer's net tax liability for the taxable year without 965 related amounts before any other entries are made on screen 965

Available elections are also shown on screen 965 below the transition tax form. These are required entries meaning that you must choose either Yes or No in the drop down for each election before leaving the screen. Specific elections vary by return type. 

06/04/18 Update

As of June 4, 2018, a section 965 election can be made on an extended return or a previously accepted return can be amended using Form 1040X. 

In addition, the IRS is granting relief from the underpayment penalty associated with section 6654 or 6655 if a taxpayer makes an estimated tax payment sufficient to satisfy both the underpayment of the first required estimated tax installment for 2018, and the full amount of the second required estimated tax installment for 2018 on or before the due date for the second installment (that is, June 15, 2018, for calendar year taxpayers).

For more information see Section 965 FAQs, Q15, Q16 and Q17.

See the following for more information and additional requirements: 

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