The Resource Coordination of distributions and mandatory repatriation

Coordination of distributions and mandatory repatriation

Label
Coordination of distributions and mandatory repatriation
Title
Coordination of distributions and mandatory repatriation
Creator
Subject
Language
eng
Summary
The general view is that as part of a move to a territorial system of taxation of offshore active earnings, U.S. taxpayers would be subject to immediate (but reduced) U.S. tax on their deferred foreign earnings (commonly referred to as "mandatory repatriation"). The House Ways & Means Committee staff appears to be leveraging the mandatory repatriation proposal included in the draft legislation (the "Tax Reform Act of 2014") released for public comment in December 2014 (the "2014 Camp Proposal"). The general rules of Section 951(a) would apply to determine a U.S. shareholder's pro rata share of the additional subpart F income, if any, of its CFCs and Section 902 corporations. Because, under these rules, the U.S. shareholder that owns the stock of the foreign corporation on the last day of the foreign corporation's tax year in which it is a CFC has the subpart F inclusion obligation, a U.S. person that acquires an interest in a CFC during the CFC's transition year would potentially be increasing its mandatory repatriation amount. This creates an issue not normally considered in the due diligence process. Although dividends paid by a specified foreign corporation in its transition year would not reduce its deferred foreign earnings, in determining a U.S. shareholder's pro rata share of a CFC's subpart F income for a tax year, Section 951(a)(2)(B) does allow dividends paid by a CFC to other persons in that same tax year to reduce the pro rata share (referred to as the "dividend offset rule"). The authors highlight certain ambiguities with the dividend offset rule of Section 951(a)(2)(B)
Citation source
In: Practical tax strategies. - Hoboken. - Vol. 99 (2017), no. 1 ; p. 34-37
http://library.link/vocab/creatorName
  • Vyas, R
  • Stenger, A. (Allen)
  • Murillo, J.E
Geographic coverage
North America
Language note
English
http://library.link/vocab/subjectName
  • CFC
  • dividend
  • repatriation
  • Subpart F income
Label
Coordination of distributions and mandatory repatriation
Instantiates
Publication
Label
Coordination of distributions and mandatory repatriation
Publication

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