Special
Corporations
Controlled Foreign Corporations
US persons, including resident aliens, who own 10 percent
or more of the voting stock of a controlled foreign corporation
are taxable currently on the corporation's undistributed
tax haven (subpart F) income, earnings invested in certain
US property, and certain excess passive assets. A foreign
corporation generally is a controlled foreign corporation
if more than 50 percent of its voting power or value is
owned by US persons that each own shares that have at least
10 percent of that voting power.
Passive Foreign Investment Companies
US persons, including resident aliens, are subject to special
rules that govern the tax treatment of income earned by
a passive foreign investment company. US shareholders (persons
holding any interest in the company) must include in income
an interest charge imposed on certain distributions (generally,
distributions that exceed a given percentage of the average
amount distributed by the passive foreign investment company
in prior years) from a passive foreign investment company.
The interest charge reflects the time value attributable
to the deferral of the recognition of the corporation's
earnings for US tax purposes. Alternatively, US shareholders
may elect to include currently their pro-rata share of
the earnings of the passive foreign investment company.
Foreign Investment Companies
US persons, including resident aliens, are subject to
special taxation on distributions from or on the disposition
of the
shares in a foreign investment company or a passive foreign
investment company. A foreign investment company is a foreign corporation which
is engaged primarily in the business of investing in securities
and commodities and which is 50 percent or more owned by
US persons. A passive foreign investment company is any foreign
corporation if 75 percent or more of its gross income comprises
dividends, interest or other passive income or if at least
50 percent of its assets are passive-income assets.
S Corporations An S corporation is a domestic corporation that elects to
be taxed generally as a partnership. The income, deductions
and credits flow through to the shareholders. An S corporation
must have no more than 100 shareholders, all of whom generally
must be US citizens or resident alien individuals.
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information contained herein is of a general nature and
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is accurate as of the date it is received or that it
will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough
examination
of the particular situation.
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© 2006 KPMG LLP, the
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