Academic journal article Journal of Accountancy

Foreign Corps Must Conform Their Tax Year

Academic journal article Journal of Accountancy

Foreign Corps Must Conform Their Tax Year

Article excerpt

International

FOREIGN CORPS MUST CONFORM TAX YEAR

A provision in the Revenue Reconciliation Bill of 1989, now before Congress, requires controlled foreign corporations (CFCs) and foreign personal holding companies (FPHCs) to conform their taxable years to those of their U.S. shareholders. If enacted, this would end the deferral of subpart F income that currently arises if a CFC or FPHC has a taxable year ending after that of its U.S. shareholders.

Subpart F income and FPHC income are deemed to be distributed on the last day of the taxable year of the CFC or FPHC. Consequently, if either has a taxable year ending after its U.S. shareholders', inclusion in U.S. taxable income would be deferred into the U.S. shareholders' following taxable year.

The U.S. shareholders referred to in the bill are those that on a particular day or days would own more than 50% of the outstanding stock of the CFC or FPHC.

If no group of U.S. shareholders owning more than 50% has the same taxable year, the appropriate taxable year would be prescribed by regulations. …

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