Joint application of Section 304 and Subpart F offers foreign tax credit planning opportunities

Article Abstract:

The complexity of IRC 304, particularly when used in combination with Subpart F, which consists of IRC 951 to 964, allows corporations with foreign subsidiaries to gain an advantageous tax credit stance. IRC 304 was implemented to require the transfer of stock from one subsidiary to another be considered a dividend by the parent. Applying Subpart F as well, dividends from foreign subsidiaries result in foreign tax credits, particularly if the transactions are between first and second tier subsidiaries.

Dividends, Foreign tax credit

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Loopholes persist despite demanding foreign corporation reporting rules

Article Abstract:

Stricter income-reporting rules for foreign corporations need to be expanded to deal with loopholes which still exist. These loopholes enable some foreign corporations to evade US taxes. The IRS needs to be able to obtain more complete information on the profitability of various subsidiaries, records related to U.S.-connected products and records showing disguised ownership structures. The Service also wants stricter penalties for violations.

Disclosure (Taxation)

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Limiting intangible and service allocations

Article Abstract:

The US Claims Court ruled that income allocated to Merck and Company Inc by the IRS for 1975 and 1976 was unsubstantiated under the provisions of IRC 482. Merck was accused of tax avoidance by transferring income from a US division in Puerto Rico which Merck claimed were royalties for services, licences and patents for Methyldopa. While not approving all of Merck's claims, the Court denied IRS assertions of impropriety.

Cases, Intangible property, Intangible assets, Allocation (Taxation), Tax allocation

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