Taxation of Foreign Source Income Under New Tax Law

Expansion of Subpart F, Dividends Received Deductions, Sales or Transfers of Foreign Corporations, Exceptions, and More

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


Conducted on Thursday, May 10, 2018

Recorded event now available

Program Materials

This webinar will provide tax professionals guidance on new rules and regulations governing the taxation of foreign source income. The panel will present an in-depth analysis of the expansion of Subpart F, the dividends-received deduction (DRD), and tax implications of sales or transfers of foreign corporations by U.S. shareholders, and will provide guidance on avoiding pitfalls in planning and compliance.

Description

New tax law places the taxation of foreign-source income at the forefront of developing tax planning strategies for U.S. individual and corporate shareholders. Notable changes to Subpart F, the DRD, and transfers of stock in foreign corporations require a careful analysis of new rules affecting the reporting of foreign-source income.

Subpart F requires that certain income of a controlled foreign corporation (CFC) be deemed distributed to the U.S. shareholders and subject to taxation. The expansion of Subpart F now increases the amount of CFC income currently taxable to U.S. shareholders. In addition, changes to the rules regarding CFC ownership will result in foreign corporations being treated as CFCs.

The DRD under Code section 245A allows a 100% deduction for the foreign-source portion of dividends received from specified 10%-owned foreign corporations by domestic corporations that are U.S. shareholders. A specified 10%-owned foreign corporation is any foreign corporation with a U.S. shareholder, even if the foreign corporation is not a CFC. The DRD may also apply to dividends received through partnerships, so long as the requirements are met.

Furthermore, for purposes of sales or exchanges of stock in a foreign corporation by a U.S. shareholder, amounts received are treated as dividends for purposes of DRD if treated as such under Code 1248. Tax professionals and advisers must be mindful of the potential tax complexities associated with the new rules as applied to foreign-source income.

Listen as our panel provide guidance on the differences between the new tax rules and prior law impacting U.S. shareholders of foreign assets, the impact of the expansion of Subpart F, obtaining the DRD, transfers of interests in foreign entities, and reporting compliance.

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Outline

  1. Taxation of foreign source income: prior law vs. new tax law
  2. Expansion of Subpart F: increase of the amount of CFC income and new CFC ownership rules
  3. Code 245A and deducting foreign source dividends received
  4. Treatment of sales or transfers of stock in foreign corporations
  5. Effective tax planning techniques for foreign source income

Benefits

The panel will review these and other key issues:

  • How the ownership rules of Subpart F have changed
  • The increase in the amount of CFC income taxable to U.S. shareholders
  • The treatment of foreign source income under the new rules
  • Deducting the foreign source portion of dividends and understanding reporting requirements
  • Tax implications of sales or transfers of foreign interests by U.S. shareholders or corporations
  • Best practices and planning techniques for counsel and tax professionals regarding the taxation of foreign income

Faculty

Ruchelman, Stanley
Stanley C. Ruchelman

Chairman
Ruchelman

Mr. Ruchelman concentrates his practice in the area of tax planning for transactional business operations, with...  |  Read More

Antebi, Galia
Galia Antebi

Atty
Ruchelman

Ms. Antebi focuses her practice on the international and domestic tax aspects of business structuring for worldwide...  |  Read More

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