23Nov 2022 by Pat Geddie
Is a 962 Election the Cure for the Hardships Caused by GILTI or Subpart F Inclusions?

Is a 962 Election the Cure for the Hardships Caused by GILTI or Subpart F Inclusions?

Tax Law
By Anthony Diosdi IntroductionU.S. shareholders of a controlled foreign corporation (“CFC”) must include any subpart F income or global low-taxed income (“GILTI”) as ordinary income on their taxable income. The current highest federal tax rate applicable to individual CFC shareholders is 37 percent. Individuals receiving GILTI inclusions may also be subject to an additional Medicare tax of 3.8 percent. To make matters worse, individual CFC shareholders cannot offset their federal income tax liability with foreign tax credits paid by their CFCs. Under these circumstances, it is not too difficult to imagine scenarios where a CFC shareholder pays more in federal, state, and foreign taxes than the actual distributions they receive from the CFC. On the other hand, for federal tax purposes, domestic C corporations that are shareholders of CFCs are…
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29Oct 2020 by Pat Geddie
Demystifying the 962 Election

Demystifying the 962 Election

Tax Law
By Anthony Diosdi IntroductionU.S. shareholders of a controlled foreign corporation (“CFC”) must include any subpart F income or global low-taxed income (“GILTI”) as ordinary income on their taxable income. The current highest federal tax rate applicable to individual CFC shareholders is 37 percent. Individuals receiving GILTI inclusions may also be subject to an additional Medicare tax of 3.8 percent. To make matters worse, individual CFC shareholders cannot offset their federal income tax liability with foreign tax credits paid by their CFCs. Under these circumstances, it is not too difficult to imagine scenarios where a CFC shareholder pays more in federal, state, and foreign taxes than the actual distributions they receive from the CFC. On the other hand, for federal tax purposes, domestic C corporations that are shareholders of CFCs are…
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04Sep 2020 by Pat Geddie
The Most Costly Mistakes of CFC Shareholders that Catch the Attention of the IRS. Part Seven- Making a 962 Election and Failing to File Forms 1116 and 1118

The Most Costly Mistakes of CFC Shareholders that Catch the Attention of the IRS. Part Seven- Making a 962 Election and Failing to File Forms 1116 and 1118

Tax Law
By Anthony Diosdi Introduction For those who are or will be involved in international business and investment transactions, it is important to have some basic understanding of the relevant tax laws. These series of articles are intended to warn individual shareholders of controlled foreign corporations (“CFCs”) (whether individual or corporate) of mistakes that will likely catch the attention of the Internal Revenue Service (“IRS”) and trigger a potential costly audit. This is the seven of a series of articles designed to educate CFC shareholders of mistakes that can catch the attention of the IRS. Individual shareholders of CFCs that recognize a GILTI inclusion may be taxed at federal rates up to 37 percent, plus another 3.8 percent Medicare Tax. Absent planning, no direct foreign tax credit is available to offset…
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