The U.S. Tax Court today issued an opinion finding that a U.S. shareholder of two controlled foreign corporations (CFCs) that in turn had guaranteed loans made to a U.S. person, must include in its gross income the CFCs' applicable earnings and that the amount included in gross income is subject to tax as ordinary income.
In granting the government’s motion for summary judgment, the Tax Court rejected a taxpayer contention that regulations promulgated under section 956 were invalid. Instead, the court held the regulations were valid.
The case is: SIH Partners LLLP v. Commissioner, 150 T.C. No. 3 (January 18, 2018). Read the Tax Court’s 54-page opinion [PDF 181 KB]
The Tax Court provided the following summary of this case.
The taxpayer contended that the regulations were invalid. Alternatively, the taxpayer asserted that the amounts included in income under sections 951(a)(1)(B) and 956(d) were to be taxed as qualified dividend income.
The Tax Court granted summary judgment for the government finding that:
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