What is personal holding company income?
A corporation will be considered a personal holding company if it meets both the Income Test and the Stock Ownership Test. The Income Test states that at least 60% of the corporation’s adjusted ordinary gross income for the tax year is from certain dividends, interest, rent, royalties, and annuities.
What is excluded from foreign personal holding company income?
Foreign personal holding company income shall not include rents or royalties that are derived in the active conduct of a trade or business and received from a person that is not a related person (as defined in section 954(d)(3)) with respect to the controlled foreign corporation.
What is foreign base company income?
(1) In generalFor purposes of subsection (a)(2), the term “foreign base company sales income” means income (whether in the form of profits, commissions, fees, or otherwise) derived in connection with the purchase of personal property from a related person and its sale to any person, the sale of personal property to any …
Is foreign personal holding company income subpart F income?
FPHCI is a category of foreign base company income under subpart F income. FPHCI generally includes passive types of income such as interest, dividends, rents, royalties and sales of property held for investment. There are many exceptions to this general rule.
What does personal holding company mean?
A personal holding company (PHC) is a C corporation in which more than 50% of the value of its outstanding stock is owned (directly or indirectly) by five or fewer individuals and which receives at least 60% of its adjusted ordinary gross income from passive sources.
What is the purpose of a personal holding company?
A personal holding company (PHC) is known as a C corporation formed for the purpose of owning the stock of other companies; therefore, the holding company doesn’t offer products or services but merely owns the shares of other corporations.
Can a foreign corporation be a personal holding company?
Foreign corp. will qualify as a foreign personal holding company (“FPHC”)(IRC 954(c)(1)) by investing only in passive income (generally consisting of dividends, capital gains, interest, rents, royalties, and annuities) producing assets; … Foreign corp.
What is look through rule?
THE LOOK-THROUGH RULE: PROTECTING AN INTERNATIONAL SHELL GAME. The CFC Look-Through Rule allows companies to dodge taxes on Subpart F income by removing their obligation to report the transactions that create it.
Is Royalty income Subpart F?
Dividends, interest, rents and royalties received from a related CFC continue to qualify for a temporary exception provided the expense does not reduce the payor’s Subpart F income. Also, payments that are disregarded pursuant to entity classification elections continue to not be recognized for most US tax purposes.
Who Must File 8992?
An S corporation that elects to be treated as an entity under Notice 2020-69 must file Form 8992.
What is included in Subpart F income?
952 of the Code defines Subpart F income to include the following items: insurance income, foreign base company income (FBCI), international boycott factor income, illegal bribes and kickbacks, and income derived from certain designated terrorism-sponsoring countries.