Читать книгу International Taxation - Adnan Islam - Страница 16

Assume in example 1-1, that Sessions Corporation incurs a significant net operating loss in its Sao Paulo office and earns a substantial commission rendering services in the United States. Before collecting the commission, Sessions transfers the commission contract to its Brazilian subsidiary to shelter the commission income earned in the United States with the Brazilian loss. Upon examination of Sessions’ U.S. tax return, the IRS will include the U.S. commission in Sessions’ U.S. tax return.

U.S. businesses are on the cash method of accounting with respect to amounts owed to a related foreign person except where the related foreign person is a CFC, a passive foreign investment company or a foreign personal holding company, in which case the U.S. business can deduct accrued amounts as of the day on which a corresponding amount of income is recognized by the CFC, the passive foreign investment company or the foreign personal holding company.

Effective October 22, 2004, accrued but unpaid amounts due from a U.S. business to a related CFC or passive foreign investment company cannot be deducted by the U.S. business until a corresponding amount is included in the gross income of a U.S. person(s) who owns stock, directly or through a foreign entity, in the CFC or the passive foreign investment company.