§957 — Controlled foreign corporations; United States persons
33 cases·6 followed·2 distinguished·25 cited—18% support
Statute Text — 26 U.S.C. §957
For purposes of this title, the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of—
the total combined voting power of all classes of stock of such corporation entitled to vote, or
the total value of the stock of such corporation,
is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.
For purposes only of taking into account income described in section 953(a) (relating to insurance income), the term “controlled foreign corporation” includes not only a foreign corporation as defined by subsection (a) but also one of which more than 25 percent of the total combined voting power of all classes of stock (or more than 25 percent of the total value of stock) is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration in respect of the reinsurance or the issuing of insurance or annuity contracts not described in section 953(e)(2) exceeds 75 percent of the gross amount of all premiums or other consideration in respect of all risks.
For purposes of this subpart, the term “United States person” has the meaning assigned to it by section 7701(a)(30) except that—
with respect to a corporation organized under the laws of the Commonwealth of Puerto Rico, such term does not include an individual who is a bona fide resident of Puerto Rico, if a dividend received by such individual during the taxable year from such corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and
with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands—
80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable year (or for such part of such period as such corporation or any predecessor has been in existence) was derived from sources within such a possession or was effectively connected with the conduct of a trade or business in such a possession, and
50 percent or more of the gross income of which for such period (or part) was derived from the active conduct of a trade or business within such a possession,
such term does not include an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands.
For purposes of subparagraphs (A) and (B) of paragraph (2), the determination as to whether income was derived from the active conduct of a trade or business within a possession shall be made under regulations prescribed by the Secretary.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.957-1 Definition of controlled foreign corporation
- Treas. Reg. §Treas. Reg. §1.957-1(a) In general.
- Treas. Reg. §Treas. Reg. §1.957-1(b) Percentage of total combined voting power owned by United States shareholders—(1) Meaning of combined voting power.
- Treas. Reg. §Treas. Reg. §1.957-1(c) Illustrations.
- Treas. Reg. §Treas. Reg. §1.957-1(d) Effective date.
- Treas. Reg. §Treas. Reg. §1.957-1(i) §1.957-1(i)
- Treas. Reg. §Treas. Reg. §1.957-2 Controlled foreign corporation deriving income from insurance of United States risks
- Treas. Reg. §Treas. Reg. §1.957-2(a) In general.
- Treas. Reg. §Treas. Reg. §1.957-2(b) Gross amount of premiums defined.
- Treas. Reg. §Treas. Reg. §1.957-3 United States person defined
- Treas. Reg. §Treas. Reg. §1.957-3(a) Basic rule—(1) In general.
- Treas. Reg. §Treas. Reg. §1.957-3(b) Puerto Rico corporation and resident.
- Treas. Reg. §Treas. Reg. §1.957-3(c) Section 931 possession corporation and resident.
- Treas. Reg. §Treas. Reg. §1.957-3(d) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.957-3(i) §1.957-3(i)
- Treas. Reg. §Treas. Reg. §1.957-3(v) The rules of § 1.
33 Citing Cases
The TAM states that a taxpayer may not rely on cases interpreting section 957 to interpret section 1504 because the cases interpreting section 957 (which the taxpayer cited) allowed the Commissioner, not the taxpayer, to apply the substance over form doctrine to prevent taxpayer abuse.
During these years members of the Eaton Group were 100% shareholders of three foreign corporations that were CFCs within the meaning of section 957.
(J:COM), a Japanese entity, making J:COM a CFC, as defined in section 957, for 2010.4 In a series of transactions that took place on February 18, 2010, Liberty Global’s interests in J:COM were transferred to an unaffiliated foreign corporation for $3,961,608,988 in a transaction treated as a sale for U.S.
years in issue Eaton was the parent ofan affiliated group of corporations (Eaton Group) that filed consolidated Federal income tax returns. Members ofthe Eaton Group were 100% shareholders offoreign corporations that were CFCs within the meaning ofsection 957. These CFCs collectively held (directly or indirectly) 100% ofthe membership interests in EW LLC. The CFCs that held membership interests in EW LLC during the years in issue were: (1) Eaton Holding III S.a.r.l., (2) Eaton Finance N.V., and
the years at issue, unless otherwise indicated. -4- March 31, 2006. Petitioner is also the parent ofnon-consolidated foreign affiliates. Petitioner's wholly-ownedBMC Software European Holding (BSEH)3 was a controlled foreign corporation (CFC) under section 957. II. Transfer Pricing Dispute Petitioner and BSEH collaboratively developed software. Two cost-sharing agreements (CSAs) governed that relationship. Under the CSAs, they co-owned the software and each held exclusive distribution rights for
ederal income tax return for the taxable year ended March 31, 2006. Petitioner is also the parent of non-consolidated foreign affiliates. Petitioner’s wholly-owned BMC Software European Holding (BSEH) was a controlled foreign corporation (CFC) under section 957. II. Transfer Pricing Dispute Petitioner and BSEH collaboratively developed software. Two cost-sharing agreements (CSAs) governed that relationship. Under the CSAs, they co-owned the software and each held exclusive distribution rights fo
of section 957, and that Mr . Anderson must therefore recognize a pro rata share of Gold & Appel's so-called subpart F income pursuant to section 951 . 'Respondent seeks summary judgment for all five of the tax years at issue (i .e,., both the years for which he pleaded guilty and the three prior years for which the charges were dismissed), , (continu
After concessions, the only issue for decision is whether accruals for the future payment of annuities made by a controlled foreign corporation (CFC), as that term is defined in section 957, reduced that CFC's earnings and profits available for the payment of dividends to shareholders .
After concessions, the only issue for decision is whether accruals for the future payment of annuities made by a controlled foreign corporation (CFC), as that term is defined in section 957, reduced that CFC’s earnings and profits available for the payment of dividends to shareholders.
The TAM states that a taxpayer may not rely on cases interpreting section 957 to interpret section 1504 because the cases interpreting section 957 (which the taxpayer cited) allowed the Commissioner, not the taxpayer, to apply the substance over form doctrine to prevent taxpayer abuse.
tion 954(d)(3), to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(b)(2), or to treat a foreign corporation as a controlled foreign corporation under section 957, except that-- (1) In applying paragraph (1)(A) of section 318(a), stock owned by a nonresident alien individual (other than a foreign trust or foreign estate) shall not be considered as owned by a citizen or by a resident alien individua
ed 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 c
ion 954(d)(3), to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(b)(2), or to treat 'a foreign corporation as a controlled foreign corporation under section 957, except that— (1) In applying paragraph (1)(A) of section 318(a), stock owned by a nonresident alien individual (other than a foreign trust or foreign estate) shall not be considered as owned by a citizen or by a resident alien individual
as general - 15 - limitation income is not in and of itself inconsistent with the payments’ being in the nature of dividends, suggesting that such clarification “would prevent any misunderstanding of the relevant authorities by the general public.” Respondent points out that FIL appears to be a controlled foreign corporation (CFC), as defined in section 957, and therefore would be subject to the “look-thru” rules of section 904(d)(3).
as general - 15 - limitation income is not in and of itself inconsistent with the payments’ being in the nature of dividends, suggesting that such clarification “would prevent any misunderstanding of the relevant authorities by the general public.” Respondent points out that FIL appears to be a controlled foreign corporation (CFC), as defined in section 957, and therefore would be subject to the “look-thru” rules of section 904(d)(3).
MFE is a controlled foreign corporation within the meaning of section 957 and, with respect to MFE, petitioner is a U.S.
MFE is a controlled foreign corporation within the meaning of section 957 and, with respect to MFE, petitioner is a U.S.