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case is ripe for disposition of that issue by partial summary
judgment.
B. Subpart F
In order to explain the issue before the Court, it is
necessary to set out an overview of the operation of subpart F.
Before 1962, the income of a foreign corporation, even one owned
by a U.S. shareholder, generally was not subject to U.S. tax if
the income was earned outside the United States and not
repatriated as a dividend. Some domestic corporations,
therefore, would keep a foreign subsidiary’s earnings in a “tax
haven” country in order to defer U.S. tax until the money was
repatriated. See Office of Tax Policy, U.S. Dept. of Treasury,
Doc. 2001-492, The Deferral of Income Earned through U.S.
Controlled Foreign Corporations: A Policy Study 13 (2000). To
curtail that practice, Congress added subpart F to the Code by
way of section 12 of the Revenue Act of 1962, Pub. L. 87-834, 76
Stat. 1006. See also H. Rept. 1447, 87th Cong., 2d Sess. (1962),
1962-3 C.B. 405, 461; S. Rept. 1881, 87th Cong., 2d Sess. (1962),
1962-3 C.B. 707, 784. See generally Yoder, 926-2d Tax Mgmt.
(BNA), “Subpart F–General”, at A-3 (2000), for a detailed
discussion of the background to and legislative history of
subpart F. Subpart F generally requires that a U.S. shareholder
include in its gross income its pro rata share of subpart F
income derived by a CFC. Sec. 951(a). Subpart F requires this
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