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Subpart F Income Rules and Sections 956, 958, and 1248: Reporting Challenges of Controlled Foreign Corporations

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, February 6, 2020

Recorded event now available

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This course will provide professionals with a solid foundation on defining a controlled foreign corporation (CFC) and a "U.S. shareholder," under the rules of Subpart F. The panel will prepare corporate tax managers and advisers to master tax reporting challenges by drilling down into different types of Subpart F income and allowable exclusions, identifying the tax consequences of repatriating a U.S. shareholder-owned foreign corporation's earnings to the United States, and describing "earnings and profits" for these purposes.

Description

The primary tax advantage of operating abroad through a foreign corporation is that foreign source income earned by the corporation is generally not taxed by the U.S. until the income is distributed, or made available on a "permanent basis," to the U.S. shareholder(s) or invested in U.S. property. This deferral of U.S. taxation has been allowed from a policy standpoint because it encourages investment in foreign countries so that U.S.-owned businesses can compete in foreign markets.

The objective of Subpart F is to tax U.S. shareholders currently on their pro-rata share of certain types of income earned by a CFC, such as passive income and income earned outside the CFC's country of incorporation in related party transactions. Under IRC Section 956, U.S. shareholders are required to include in gross income their pro-rata share of the CFC's increase in earnings invested in U.S. property made during the year.

To prevent taxpayers from changing the character of income from ordinary to capital gain via a stock sale, IRC 1248 taxes gain on CFC stock as a dividend to the extent of the CFC's allocable earnings and profits.

Listen as our authoritative and experienced panel of international tax practitioners prepares you to master the ins and outs of tax reporting for CFCs. The panel will explain different types of Subpart F income and allowed exclusions, lay out tax ramifications of bringing U.S.-owned earnings from foreign corporations to the United States, and drill down into calculating E&Ps.

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Outline

  1. Identify the definition of a CFC, as well as any associated terms such as "U.S. shareholder"
  2. Recognize the different types of Subpart F income, as well as allowable exclusions
  3. Identify the tax consequences of repatriating a U.S. shareholder-owned foreign corporation's earnings to the U.S., and describe E&P for these purposes

Benefits

The panel will analyze and tackle these and other relevant topics:

  • Constructive ownership tests in CFCs
  • Exclusions from foreign base company income under Subpart F and related regulations
  • Treatment of earnings invested in U.S. property

Faculty

Acharya, Pallav
Pallav Acharya, CPA, FCA, CGMA
Founder and Owner
CPA Global Tax & Accounting

Mr. Acharya provides tax and accounting services, specializing in international tax and business issues for nearly 3...  |  Read More

Cathcart, Alan
Alan Cathcart
Senior Advisor
Alvarez & Marsal Taxand

Mr. Cathcart specializes in corporate and international tax, in particular cross-border mergers and acquisitions....  |  Read More

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