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Code §962 Election Offers Benefits Under U.S. Tax Reform

Volume 5 No 4    /    Read Article

By Elizabeth V. Zanet and Galia Antebi

Two provisions in the recent tax reform legislation – Code §§965 (transition tax) and 250 (50% deduction for G.I.L.T.I.) – focus on C.F.C.'s and their U.S. Shareholders. In each case, corporate U.S. Shareholders are entitled to a deduction that is either not granted to an individual with regard to income that is taxed under Subpart F or that for some individuals results in a higher applicable tax rate. However, Code §962 may allow an individual who is a U.S. Shareholder of a C.F.C. to elect to be taxed on the Subpart F Income as if a corporation. This allows for tax at a lower rate and a foreign tax credit for corporate income taxes paid by the C.F.C. Elizabeth V. Zanet and Galia Antebi explain the workings of Code §962 and focus on the position of naysayers who caution that it may not provide the relief it appears to provide.    See more →