Impact of the Xerox case on the computation of the deemed-paid foreign tax credit from UK corporations

Article Abstract:

The US Court of Appeals for the Federal Circuit disagreed with the IRS's interpretation of Revenue Proc. 80-18 and found in Xerox Corp. v. United States that Xerox properly claimed foreign tax credit for UK Advance Corporation Tax paid by a UK subsidiary. Under the UK tax, a UK company can surrender a portion of its tax to subsidiaries, which may then use the tax to offset mainstream tax, to reduce double taxation. The IRS attempted to limit the foreign tax credit to UK subsidiaries that actually used the UK Advance Corporation Tax to offset mainstream tax, but the Federal Circuit ruled that such use was not necessary.

Corporate taxes, Dividends, Corporations, international

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Controlled foreign corporations: proposed regulations deal with Subpart F and foreign personal holding company income

Article Abstract:

Changes in the computation of Subpart F income contemplated by proposed IRS regulations under IRC section 952(c) and 960 may have a significant effect on foreign tax credits available to US taxpayers with controlled foreign corporations. The regulations affect adjustments in Subpart F income when it exceeds earnings and profits and calculations of deemed-paid foreign tax credits. Review of the regulations suggests that planning opportunities exist to maximize foreign tax credits and minimize tax liabilities.

Controlled foreign corporations, Personal holding companies, Recapture (Taxation)

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