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Substantive Principles--Taxation of Subpart F Income
Section 951 sets forth the operative rules governing
treatment of subpart F income and provides in pertinent part as
follows:
SEC. 951. AMOUNTS INCLUDED IN GROSS INCOME OF UNITED
STATES SHAREHOLDERS.
(a) Amounts Included.--
(1) In general.--If a foreign corporation
is a controlled foreign corporation for an
uninterrupted period of 30 days or more during any
taxable year, every person who is a United States
shareholder * * * of such corporation and who owns
(within the meaning of section 958(a)) stock in
such corporation on the last day, in such year, on
which such corporation is a controlled foreign
corporation shall include in his gross income, for
his taxable year in which or with which such
taxable year of the corporation ends--
(A) the sum of--
(i) his pro rata share * * * of the
corporation’s subpart F income for such
year * * *
Section 957 then goes on to define a controlled foreign
corporation (CFC) as a foreign corporation in which more than 50
percent of the total combined voting power or total value of
stock is owned by United States shareholders on any day during
the corporation’s taxable year.
Hence, two issues relevant in determining petitioners’
liability for taxes on income received by CIBV are: (1) The
ownership of CIBV for purposes of evaluating its status as a CFC
in 1989; and (2) the ownership of CIBV for purposes of allocating
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Last modified: May 25, 2011