International Tax

CFCs—General Overview (Portfolio 926)

  • This Portfolio describes the rules for the U.S. federal income taxation of shareholders of controlled foreign corporations (CFCs) under Subpart F of the Internal Revenue Code.


The Bloomberg Tax Portfolio, CFCs—General Overview begins with a discussion of the background and legislative history of Subpart F. A detailed analysis is provided of the ownership tests that must be satisfied for Subpart F to apply, including such key terms as “controlled foreign corporation,” “United States person,” and “United States shareholder.”

This Portfolio also describes the categories of items included in U.S. Shareholders’ income under Subpart F, and the rules for determining the amounts includible in income and the U.S. tax treatment. It further provides an overview of the tax results to U.S. Shareholders of various transactions involving CFCs, including the organization and reorganization of a CFC, CFC distributions, and liquidations and dispositions of CFCs. Finally, it describes the rules coordinating Subpart F with other special rules that apply to foreign entities and summarizes the return and compliance rules that apply to CFCs. Because the CFC Portfolios are meant to be used as a group in analyzing the Subpart F rules, the Worksheets of this Portfolio are intended for use not only with this Portfolio but also with the other CFC Portfolios.

Table of Contents

I. Introduction
II. Background and Legislative History
III. Overview of Subpart F and Related Provisions
IV. Definition of U.S. Shareholder
V. Definition of Controlled Foreign Corporation
VI. Stock Attribution Rules
VII. Items Subject to Current Inclusion Under § 951(a)
VIII. Determination of the Amounts of § 951(a) Items
IX. Earnings and Profits Limitations
X. Pro Rata Share Taxable to U.S. Shareholders
XI. Exclusion for Previously Taxed Income
XII. Deemed-Paid Foreign Tax Credits
XIII. Adjustments to Basis In CFC Stock and Other Property
XIV. Election by Individuals to be Subject to Tax at Corporate Rates
XV. Organizations, Reorganizations and Dispositions of CFCs
XVI. Coordination of Subpart F With Other Provisions That Apply to Foreign Corporations
XVII. Returns and Reporting Requirements

Lowell Yoder
McDermott Will & Emery LLP
Damon Lyon
McDermott Will & Emery LLP
David Noren
McDermott Will & Emery LLP