Textron Inc. and Subsidiary Companies - Page 12
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result even if the subpart F income is not actually distributed.
See Vetco, Inc. v. Commissioner, 95 T.C. 579, 586-587 (1990).
The object of subpart F is to tax currently specified
earnings of foreign corporations that are, in the aggregate,
controlled by U.S. shareholders. The scope of subpart F,
however, is limited. It applies primarily to the types of income
described in section 952 (subpart F income). Secs. 951(a) and
952. Moreover, it affects only foreign corporations that are
controlled by certain U.S. shareholders and, in those cases,
applies only to those U.S. shareholders who own a requisite
percentage of a CFC’s voting power. Secs. 951(b), 957(a).
Our analysis of whether a taxpayer who is a shareholder in a
foreign corporation must include subpart F income in the
taxpayer’s income starts with a determination of whether the
foreign corporation is a CFC. A CFC is any foreign corporation
more than 50 percent of whose stock, either by voting power or
value, is owned directly, indirectly, or constructively by U.S.
shareholders. Sec. 957(a). The parties agree that Avdel is a
We next address the question of whether the taxpayer is a
U.S. shareholder subject to the inclusion of subpart F income
under section 951(a). The phrase “U.S. shareholder” is a term of
art that finds its meaning in section 951(b). Our reading of
that text in conjunction with our reading of section 951(a)
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