Representative Smith also asks that you briefly advise him on the following: What is meant by...

Representative Smith also asks that you briefly advise him on the following:

What is meant by the subpart F rules? Why are they part of the Internal Revenue Code?

What is a CFC? What are the requirements for when a corporation is a CFC?

Expert Solution

The earnings of foreign corporations generally are not taxed in the U.S. until the foreign corporation repatriates its earnings through the distribution of dividends. This is known as the concept of “deferral” (i.e., U.S. taxation is deferred until repatriation). Subpart F income is one of these exceptions to deferral.Subpart F income only applies to Controlled Foreign Corporations (CFC's).

Internal Revenue Code gives rules for the taxation of income and since dividend from foreing sources are part of Income, the rules governing them would also be part of the same rules

A CFC, very generally, is defined as a foreign corporation in which U.S. persons own more than 50 percent of the corporation's stock (measured by vote or value). Stock ownership includes direct ownership as well as stock owned indirectly or constructively.

A corporation is CFC when the requirement of more than 50% of company stock is met

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ekkarill92 answered 2 years ago

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