This time around, the Eighth Circuit comes down with a reversal of Brown

Article Abstract:

The Eighth Circuit 1996 vacation of the Tax Court's decision in the Brown Group case properly addresses the questions surrounding controlled foreign corporation (CFC) earned Subpart F income. Brown's elaborate organizational scheme, involving CFCs and a foreign partnership, was the type of perceived tax loophole that should be addressed by Congress rather than by the courts. The Tax Court's withdrawal of its initial opinion, followed by the Eighth Circuit's vacation of the Tax Court's subsequent decision, illustrates the difficulty of judicially resolving complicated tax issues.

Partnerships, Multinational Corporations, Cases, BG, Brown Group Inc.

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Brown Group shows interplay between Subpart F and partnership provisions

Article Abstract:

The Tax Court ruled in Brown Group that a controlled partnership could not be treated like a controlled foreign corporation for Subpart F income purposes under IRC section 957(a). The income of the controlled entity would then only be treated as Subpart F income to the parent if the controlled entity was seen as a sham. The Court found that the controlled partnership, Brinco, was established for legitimate business purposes and was not a sham. The Tax Court has decided to reconsider this case.

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Treasury grapples with subpart F branch rule and 'hybrid branches.'

Article Abstract:

Two 1998 IRS notices address potential abuse of foreign tax audits and avoidance of applicable subpart F rules. Multinational corporations have begun to use foreign hybrid branches as a means of maximizing credits while limiting the tax liability of controlled foreign corporations under subpart F.

Laws, regulations and rules, Foreign tax credit

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