The controlling domestic shareholders of a foreign corporation
are generally the U.
Active versus inactive Controlled Foreign Corporations
--In general, a foreign corporation
was considered active if earnings and profits, income taxes, receipts, expenses, distributions of E&P, or certain transactions between the foreign corporation
and its subsidiaries or majority shareholder were reported on Form 5471, Information Return of U.
In addition, rules were implemented with respect to transfers to and from foreign corporations
to recognize the special status of foreign corporations
in which U.
To address the surtax result, this Part proposes two changes aimed at increasing the usefulness of the current rule that permits a foreign corporation
to avoid deemed remittances of U.
A foreign corporation
will be classified as a PFIC if it satisfies an income test or an asset test.
Any American who owns more than 25 percent of the shares of a passive foreign corporation
or any shares in a "U.
corporate tax return of a foreign corporation
(Form 1120-F) for the first year
corporation ("first-tier" subsidiaries) and any foreign corporations
controlled by a directly-controlled foreign corporation
The decision to purchase assets rather than stock of a foreign corporation
from the seller should not be reportable.
The Supreme Court called the discrimination in South Central Bell not merely theoretical; the undisputed record showed the average Alabama domestic corporation paid only 20% of the franchise tax it would pay if treated as a foreign corporation
An expatriated entity is a domestic corporation or partnership with respect to which a foreign corporation
is a "surrogate foreign corporation
" and any U.
Especially for companies that are continually audited, TEI recommends eliminating individual filings for each controlled foreign corporation
(CFC) and substituting a schedule of CFCs containing key information, including the balance in the earnings and profits (E&P) and tax pools.