What is irc 1248?

For purposes of this section, a United States person shall be treated as having sold or exchanged any stock if, under any provision of this subtitle, such person is treated as realizing gain from the sale or exchange of such stock.

What is a 1248 dividend?

Section 1248(a) of the Code provides, in general, that if a United States person recognizes gain on a sale or exchange of stock in a foreign corporation, then the gain shall be included in the gross income of such person as a dividend to the extent of the earnings and profits of the foreign corporation attributable to …

What is Section 245A?

Code Sec. 245A generally allows a domestic corporation a 100-percent dividends received deduction (DRD) (the “section 245A deduction”) for the foreign-source portion of a dividend received after December 31, 2017, from a specified 10 percent-owned foreign corporation (an “SFC”).

What is an exchanging shareholder?

An exchanging shareholder is defined in the proposed regulations as a person that, in a restructuring transaction qualifying for nonrecognition under section 354, 356, or 361(a), exchanges stock of an acquired corporation for stock in either a foreign acquiring corporation or a foreign corporation that is in control of …

Is a wholly owned subsidiary a CFC?

When a company that is considered a PFIC also qualifies as a CFC then that company is taxed under Subpart F income rules and the passive foreign investment rules are not applicable.

What term refers to passive investment in a foreign company’s financial assets?

A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets: At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations.

What is a Section 245A shareholder?

A Sec. 245A shareholder is a domestic corporation that is a U.S. shareholder with respect to a specified 10%-owned foreign corporation (SFC) and that owns directly or indirectly stock of the SFC.

Does 245A apply to individuals?

Section 956 will continue to apply to US shareholders that are not corporations, such as individuals, regulated investment companies, and real estate investment trusts. The subsequently issued temporary Section 245A regulations could further limit the potential applicability of these Section 956 regulations.

Can I swap stocks tax free?

Under IRC §1032, a corporation can issue stock in exchange for money or other property tax-free. Under §1036, common stock or preferred stock of the same corporation can be exchanged tax-free for stock of the same type, whether it is exchanged between the corporation and the stockholder or between stockholders.

When does section 1248 apply to Stock Exchange?

Section 1248 (a) applies to a sale or exchange of stock in a foreign corporation only if gain is recognized in whole or in part upon the sale or exchange. Thus, for example, if a United States person exchanges stock in a foreign corporation and no gain is recognized on the exchange under section 332, 351, 354]

How does section 1248 apply to a CFC?

Section 1248 requires that any gain recognized on the sale or exchange of the stock of a CFC be treated as a dividend to the Section 1248 shareholders to the extent of the E&P of the CFC. The E&P of the CFC includes any foreign subsidiaries of the CFC that would independently qualify as a CFC through indirect ownership.

When is a gain recognized under section 1248 ( a )?

For purposes of section 1248 (a), gain recognized by a shareholder under section 301 (c) (3) in connection with a distribution of property by a corporation with respect to its stock shall be treated as gain from the sale or exchange of stock of such corporation .

Who are the US shareholders of a CFC?

A US person who holds at least 10 percent of the stock of a controlled foreign corporation (CFC), will be considered to be a Section 1248 shareholder for US tax purposes. A CFC is defined as a foreign corporation that is owned more than 50 percent by one or more US shareholders.