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May 3, 2018 - Haoshen Zhong

Section 965 and Fiscal Year Foreign Corporations, Part II

Fiscal year corporations and section 965

Today’s post is a followup to the (last post), about a US citizen who owns shares of a fiscal year foreign corporation that is subject to the new deemed repatriation rule of section 965. Here is the setup:

I am a US citizen reporting on a calendar year. I have a foreign corporation with a fiscal year ending June 30. When am I subject to the repatriation tax? What is the rate of tax?

In the last post, I wrote that this corporation may be subject to section 898, which forces certain CFCs to conform to its shareholder(s) tax year.... continue reading

Minimultinationals
April 19, 2018 - Haoshen Zhong

Section 965 and Fiscal Year Foreign Corporations

*Please see the follow-up to this post here.

Fiscal year corporations and section 965

Here is one question that we saw rather often:

I am a US citizen reporting on a calendar year. I have a fiscal year corporation. When am I subject to the repatriation tax? What is the rate of tax?

This post explains why you might not have a fiscal year corporation under tax law, why a US shareholder of a fiscal year corporation (assuming it is one) takes into account income in 2018, and how the participation exemption works for shareholders of fiscal year corporations.

Background: deemed repatriation under section 965

A quick introduction to section 965: In December of 2017, Congress passed laws that changed the US taxation of foreign income significantly.... continue reading

Minimultinationals
April 5, 2018 - Haoshen Zhong

Effective Tax Rate Under Section 965 for Individuals

One question we get a lot is this:

My client is a US citizen who has to recognize deferred income from foreign corporations under the new deemed repatriation law. What is the effective tax rate?

The effective tax rate is going to depend on this client’s income and what else he has going on, so it is not particularly effective to tell you the tax rate. Instead, this post tells you how to calculate the participation exemption that applies to the deemed repatriation, so you can plug in some numbers and get the effective tax rate for each client.

Background: deemed repatriation under section 965

A quick introduction to section 965: In December of 2017, Congress passed a law that changes the US taxation of foreign income fairly significantly.... continue reading

Minimultinationals
March 22, 2018 - Haoshen Zhong

GILTI vs Passthrough Deduction

GILTI vs passthrough deduction

If you were paying attention to the tax law rewrite last year, you may have heart the term “global intangible low-taxed income” (GILTI). It is supposed to establish a minimum tax on foreign source income for multinational corporations. It also affects US citizens and residents.

We previously covered what happens under default GILTI rules and with a corporate rate election. The basic idea is that most of the profits of the foreign corporation are taxed to the US shareholders directly every year.

If the country where the business is located has high corporate income tax, it is generally better for US shareholders to elect to apply corporate tax rates to GILTI.... continue reading

Minimultinationals
March 18, 2018 - Phil Hodgen

Upcoming Section 965 Workshop and a Collection of Links

The Tax Cuts and Jobs Act completely rewrote Section 965 to force a one-time repatriation of deferred earnings and profits in foreign corporations. It forces income recognition in the 2017 tax year, so there is not a lot of time to figure this one out!

Rufus Rhoades will give a one-hour free workshop on March 23, 2018 at 9:00 am Pacific Time. Register here; it’s free.

I call this a workshop because the intention is for Rufus to talk a bit about the new law, then we will open it up for questions and input. Some of you out there are smart about Section 965, so please share with us.... continue reading

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