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reveals that not every U.S. shareholder in a CFC is subject to
section 951(a). Section 951(a) applies only to a taxpayer “who
owns (within the meaning of section 958(a)) stock in such
corporation [the CFC] on the last day, in such year, on which
such corporation is a controlled foreign corporation”. As
opposed to the broadly inclusive text of section 951(b), where
direct, indirect, and constructive ownership is considered,
section 951(a) requires that the shares be directly owned or
indirectly owned within the meaning of section 958(a) for the
inclusion to be required. Section 958(a) attributes only stock
owned through foreign entities to its indirect domestic owner.
Thus, a taxpayer who owns no stock through a foreign entity is
subject to the inclusion of subpart F income under section 951(a)
only if the taxpayer is a U.S. shareholder who directly owns
stock in the CFC.
Here, such is not the case. Textron did not directly own
the Avdel shares. The voting trust did. Ms. Bailey, as trustee
of the voting trust, held all of the Avdel shares that Textron
had purchased and owned them in her capacity as the voting
trust’s trustee. While Textron is considered to own those shares
under section 958(b), which incorporates by reference section 318
(with amendments),2 Textron did not own those shares either
2 Sec. 318 in relevant part provides:
(continued...)
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