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, November 15, 2018

Recorded event now available

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Program Materials

This CPE webinar will provide tax professionals guidance on new rules and proposed 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.


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 addition of GILTI, the DRD, and its application to transfers of stock in foreign corporations as well as other changes require a careful analysis of the new rules affecting the structure of offshore activities and the U.S. reporting of foreign-source income. Further, U.S. shareholders of certain foreign corporations have a transition tax inclusion in their 2017 filing for deemed repatriated and deferred earnings and profits.

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 addition of GILTI, which is viewed as an 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 could be corporation that 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.

In anticipation of the DRD, Code Section 965 imposes a one-time tax on U.S. shareholders of certain foreign corporations for the retained deferred earnings and profits of such corporations. Individual shareholders, who do not benefit from the DRD were also caught by this transition tax and proposed regulations issued in August 2018 provide some guidance.

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 provides guidance on the differences between the new tax rules and prior law impacting U.S. shareholders of stocks in foreign corporations, the impact of the expansion of Subpart F, obtaining the DRD, transfers of interests in foreign entities, and reporting compliance.



  1. Taxation of foreign source income: prior law vs. new tax law
  2. Code 245A and deducting foreign source dividends received
  3. Treatment of sales or transfers of stock in foreign corporations
  4. Code 965: transition tax
  5. Expansion of Subpart F: new CFC ownership rules
  6. GILTI and FDII
  7. Effective tax planning techniques for foreign source income


The panel will review these and other relevant 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. individual and corporate shareholders
  • Best practices and planning techniques for counsel and tax professionals regarding the taxation of foreign income


Antebi, Galia
Galia Antebi

Member (Partner)

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

Ruchelman, Stanley
Stanley C. Ruchelman


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

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