Outbound Tax Planning of U.S. Citizens and Residents

Income earned by a U.S. taxpayer from foreign operations conducted by foreign corporate entities generally is only subject to U.S. federal income tax when the income is distributed as a dividend to U.S. shareholders. Until that time, U.S. federal income tax is generally deferred. Nevertheless, anti-deferral regimes, such as the controlled foreign corporation (“CFC”) rules under Subpart F and the passive foreign investment company rules may cause U.S. shareholders of a foreign corporation to be taxed on a current basis in the U.S. with respect to certain income, regardless of whether the income has been distributed. To deal with the perceived abuses arising from the alleged misuse of this deferral principle. Congress created a number of complex rules that impact most taxpayers in the international investment area.
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