Other anti deferral provisions tx 8300
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Other Anti-Deferral Provisions Tx 8300. Learning Objectives. Explain the reason for FPHCs, PFICs, and QEFs Identify PFICs Calculate the tax and ________ charges resulting from PFIC status Explain the benefits of _____ Define FPHCs Explain how the FPHC provisions curb tax _________.

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Other Anti-Deferral Provisions Tx 8300

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Other anti deferral provisions tx 8300

Other Anti-Deferral ProvisionsTx 8300


Learning objectives

Learning Objectives

  • Explain the reason for FPHCs, PFICs, and QEFs

  • Identify PFICs

  • Calculate the tax and ________ charges resulting from PFIC status

  • Explain the benefits of _____

  • Define FPHCs

  • Explain how the FPHC provisions curb tax _________

You should be able to:


Barriers to tax deferral

Barriers to Tax Deferral

  • Controlled foreign corporations

    • ____________ ownership can avoid CFC status

    • _____________ abroad avoids Subpart F

    • __ _______ activity avoids Subpart F

  • _______ foreign investment companies

  • Foreign personal ______ companies


Pfic defined

PFIC: Defined

Foreign corporation

if

Foreign __________ companies usually are PFICs. Also, foreign _________ companies are vulnerable when they:

or

Experience operating ______

Possess ___ business assets

Raise _______

________ large holdings


Example pfic status

Example: PFIC Status

Three NRAs and ___ U.S. citizens own equal amounts of TourCo. Sixty percent of TourCo’s assets earn passive income, and ___% of TourCo’s income is passive. Under what conditions does TourCo avoid PFIC status?


Pfic results

PFIC: Results

  • U.S. persons owning PFIC stock

  • Pay ________ charge when they:

    • Receive ________ or

    • Realize ____ from selling stock

  • Differs from CFC regime

    • No __________ dividends

    • U.S. persons owning < ___% pay interest charge


Pfic excess distributions

PFIC: Excess Distributions

Non-Excess Portion is _______ Gross Income

Distribution

Total

______

Distribution

Current

Aggregate

Distributions

Average Distributions

in Prior __ Years

=

- ____% x

Gross income if allocable to:

Allocated Over _______ Period

Current year,

Pre-19___ years, or

Days before ____ status

Used to calculate ________ ___ ______


Pfic deferred tax amount

PFIC: Deferred Tax Amount

______ distribution allocable to post-1986 PFIC years other than _______ year times ___ statutory rates

Aggregate Increases in _____

Deferred Tax Amount

Interest on “aggregate increases in taxes” using rate _____ points higher than Federal _____-term rate

Aggregate Amount of ________


Example deferred tax amount

Example: Deferred Tax Amount

On 1/1/01, DomCo bought all shares in a PFIC. The PFIC paid cash dividends to DomCo as follows:

$10,000 on 12/31/01

$10,000 on 12/31/02

$11,000 on 12/31/03

$12,000 on 12/31/04

$______ on 12/31/05

Assume the top corporate tax rate is ___% and the applicable interest rate is ___%. Calculate the deferred tax amount in 2005.


Pfic problems and solutions

PFIC: Problems and Solutions

  • Negative aspects of PFIC regime

    • Retroactive loss of ________

    • ___ statutory rates

    • No _______ gain treatment

  • Mark-to-______ elections

  • Qualified ________ funds


Mark to market election

Mark-to-Market Election

  • Available only if PFIC stock has clearly-established ______ value

    • ________ gain or loss recognized ____ year

    • _____ of shares adjusted

  • Benefits

    • No interest charge

    • Otherwise unrealized losses __________

    • ____ applicable rather than ___ statutory rates


Qualified electing fund

Qualified Electing Fund

  • Election applies to ___________, not PFIC

  • _____ treatment for income (not ______)

  • Benefits

    • No interest charge

    • ____ applicable rather than ___ statutory rates

    • _______ gains flow through from QEF to owner

    • Selling QEF stock can result in _______ gain


Fphc defined

FPHC: Defined

  • Foreign corporation

  • Five or fewer ___ individuals directly, indirectly, or constructively own __ ___% of voting _____ or stock value

  • FPHC income ≥ ___% of gross income (or ___% in later years)


Fphc results

FPHC: Results

  • Constructive dividend to U.S. _______ owning stock

  • Pro rata portion of _____________ FPHC income

  • Increase stock _____


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