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A Blank Rome team secured the cancellation of an over two-million-dollar assessment levied on individual taxpayers in connection with amounts they were deemed to have received under Internal Revenue Code § 965.

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In a case of first impression, the New Jersey Tax Court found that individual taxpayers were not required to include in their New Jersey gross income the undistributed earnings of controlled foreign corporations for purposes of the Gross Income Tax, even though those amounts were included in their federal income under IRC § 965.

The Tax Court rejected the New Jersey Division of Taxation’s (“the Division”) argument that such amounts were “deemed dividends” subject to New Jersey Gross Income Tax, finding that under the plain language of the statute there must be an actual “distribution in cash or property” in order for there to be a dividend, and that, in this case, there was no such distribution. Accordingly, the court granted the plaintiffs’ motion for summary judgment and reversed the Division’s assessment of more than two million dollars against our clients.

Read our Client Alert about this matter here: <a href="/news-and-events/new-jersey-tax-court-rules-individuals-are-not-subject-tax-deemed-dividends-under-irc/" id="26102">New Jersey Tax Court Rules That Individuals Are Not Subject to Tax on “Deemed Dividends” under IRC Section 965</a>.

The Blank Rome team was led by <a href="/people/irwin-m-slomka/" id="18982">Irwin M. Slomka</a> and Kara M. Kraman.

Irwin M. Slomka

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Blank Rome Secures Cancellation of Two-Million-Dollar Assessment Levied on Individual Taxpayers

<a href="https://www.blankrome.com/publications/new-jersey-tax-court-rules-individuals-are-not-subject-tax-deemed-dividends-under-irc">New Jersey Tax Court Rules That Individuals Are Not Subject to Tax on “Deemed D…</a>

Blank Rome Secures Cancellation of Two-Million-Dollar Assessment Levied on Individual Taxpayers

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Blank Rome Secures Cancellation of Two-Million-Dollar Assessment Levied on Individual Taxpayers

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