Top Audit Triggers of a CFC that Will Catch the Attention of the IRS. Part Four- Claiming a Loss Associated with Subpart F Income Against GILTI Income
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 the mistakes that will likely catch the attention of the Internal Revenue Service (“IRS”) and trigger a potential costly audit. The transition from a worldwide income system to a hybrid territorial system via a participation exemption (i.e., a deduction for dividends received from a foreign corporation) has brought about a one-time repatriation tax on the earnings and profits (“E&P”) of a foreign corporation. The United States now has a hybrid territorial system to tax offshore income at a rate…