The United States has for many years taxed certain U.S. shareholders of closely held or controlled foreign corporations deriving principally passive or related-party income on their pro rata share of the corporation's earnings whether or not distributed. These rules are commonly referred to as "anti-deferral provisions" and are contained in the Code. The primary anti-deferral provisions for corporations are the controlled foreign corporation (CFC) rules and the passive foreign investment company (PFIC) rules.
This article was written by Stafford Smiley
and Lucy Lee. Stafford Smiley is Professor, Graduate Tax Program, at the Georgetown University Law Center. Lucy S. Lee is a Member of, and Professor Smiley is Senior Counsel to, the law firm of Caplin & Drysdale, Chartered, Washington, DC. The authors wish to express their appreciation for assistance rendered by Noam Noked, a summer intern at Caplin & Drysdale in 2011 and an S.J.D. student at Harvard Law School.
This article was published in the November/December issue of Corporate Taxation
, © 2011 Thomson Reuters/WG&L.
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