TAX 9869 Lecture Notes - Lecture 63: Foreign Corporation, Passive Income

4 views2 pages
11 Aug 2020
Class 10: July 13th
CFCs= Controlled Foreign Corporations
More than 50% owned by USSHs vote or value and the USSH is a 10% owner vote or
Add up ownership, more than 50%= cfc
Rules of attribution- indirect, direct, constructive ownership= KNOW FOR FINAL EXAM
Control: BOD, pships, general partner can create a CFC b/c has rights to vote on a
controlling interest in a CFC
Subpart F= any income that is earned by a foreign corporation, even CFC, is not subject
to US tax at point of time distributed out to SH
CFC- rule of subpart F was introduced as a backstop to deferral (not paying tax until
Intro’d Subpart F- certain types of income if earned by CFC, subject to tax
immediately to USSHs
General: subpart F goes into foreign base company income as a category and within
category, different categories of income
Subpart F requires not that the CFC pay tax (CFC pays tax only if the CFC has a US
trade/biz in the US). Subpart F rules require that the USSH has to pay tax
Foreign person holding company income= passive income that the CFC earns, subject
to immediate US taxation to the USSH
The USSH that pays tax is only the USSH who is a direct/indirect SH
If you are a constructive owner of a CFC- own it through attribution- through a corp,
pship, husband and wife
Can have downward attribution: if foreign parent on top and two subs below (US and
foreign)- CFC created for sub b/c of downward attributed
But if just constructive owner, don’t have to pick up Subpart F income
Only direct/indirect USSHs have to pick up Subpart F income
Indirect owner/direct Owner Example:
I have a CFC and US Corp is 100% owner (USSH is a direct owner).
Another CFC below, USSH indirect owner bc owns it through a foreign corp/pship=
indirect ownership
US is still indirect owner of CFC 2, US picks up Subpart F income of CFC 2
Unlock document

This preview shows half of the first page of the document.
Unlock all 2 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.