Tax News

CCH (cch.taxgroup.com) reports:

The IRS has issued initial guidance providing an exception to the general rules of subpart F for certain types of passive income received by a controlled foreign corporation (CFC) from a related person that is also a CFC. In general, this exception provides that dividends, interest, rents, and royalties received or accrued by one CFC from a related CFC is not foreign personal holding company income, as defined in Code Sec. 954(c)(1)(A), to the extent such income is attributable or properly allocable to income of the distributing CFC that is neither subpart F income nor income treated as effectively connected with the conduct of a United States trade or business. The guidance defines the relevant terms (e.g., "dividends", "related person") for purposes of the exception, explains which types of distributions will qualify for the exception and provides anti-abuse rules. Specific rules are provided for partnerships that have one or more partners that are CFCs.
The majority of the rules are effective for taxable years of foreign corporations beginning after December 31, 2005; however, anti-abuse rules applicable to options (or similar instruments) and conduit entities are applicable for taxable years of foreign corporations beginning after December 31, 2006. The IRS and the Treasury Department intends to incorporate this guidance and any future guidance on these issues into formal regulations.
Notice 2007-9, 2007FED ¶46,268
Other References:
Code Sec. 952
CCH Reference - 2007FED ¶28,496.60
Code Sec. 954
CCH Reference - 2007FED ¶28,543.0252
Tax Research Consultant
CCH Reference - TRC INTLOUT: 9,106
CCH Reference - TRC INTLOUT: 9,106.30