§962 — Election by individuals to be subject to tax at corporate rates
7 cases·1 followed·1 distinguished·1 questioned·4 cited—14% support
Statute Text — 26 U.S.C. §962
Under regulations prescribed by the Secretary, in the case of a United States shareholder who is an individual and who elects to have the provisions of this section apply for the taxable year—
the tax imposed under this chapter on amounts which are included in his gross income under section 951(a) shall (in lieu of the tax determined under sections 1 and 55) be an amount equal to the tax which would be imposed under section 11 if such amounts were received by a domestic corporation, and
for purposes of applying the provisions of section 960
1
1 See References in Text note below.
(relating to foreign tax credit) such amounts shall be treated as if they were received by a domestic corporation.
An election to have the provisions of this section apply for any taxable year shall be made by a United States shareholder at such time and in such manner as the Secretary shall prescribe by regulations. An election made for any taxable year may not be revoked except with the consent of the Secretary.
For purposes of applying subsection (a)(1), the amount in each taxable income bracket in the tax table in section 11(b) shall not exceed an amount which bears the same ratio to such bracket amount as the amount included in the gross income of the United States shareholder under section 951(a) for the taxable year bears to such shareholder’s pro rata share of the earnings and profits for the taxable year of all controlled foreign corporations with respect to which such shareholder includes any amount in gross income under section 951(a).
The earnings and profits of a foreign corporation attributable to amounts which were included in the gross income of a United States shareholder under section 951(a) and with respect to which an election under this section applied shall, when such earnings and profits are distributed, notwithstanding the provisions of section 959(a)(1), be included in gross income to the extent that such earnings and profits so distributed exceed the amount of tax paid under this chapter on the amounts to which such election applied.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.962-1 Limitation of tax for individuals on amounts included in gross income under section 951(a)
- Treas. Reg. §Treas. Reg. §1.962-1(a) In general.
- Treas. Reg. §Treas. Reg. §1.962-1(b) Rules of application.
- Treas. Reg. §Treas. Reg. §1.962-1(c) Example.
- Treas. Reg. §Treas. Reg. §1.962-1(d) Applicability dates.
- Treas. Reg. §Treas. Reg. §1.962-1(i) His section 965(a) inclusion amounts (as defined in § 1.
- Treas. Reg. §Treas. Reg. §1.962-1(v) Section 1.
- Treas. Reg. §Treas. Reg. §1.962-1(x) A also must compute the limitation on the credit for the foreign income taxes deemed paid under section 960(a) separately with respect to the foreign source passive category taxable income under section 962, namely, A's taxable income attributable to the subpart F inclusion.
- Treas. Reg. §Treas. Reg. §1.962-2 Election of limitation of tax for individuals
- Treas. Reg. §Treas. Reg. §1.962-2(a) Who may elect.
- Treas. Reg. §Treas. Reg. §1.962-2(b) Time and manner of making election.
- Treas. Reg. §Treas. Reg. §1.962-2(c) Effect of election—(1) In general.
- Treas. Reg. §Treas. Reg. §1.962-2(d) Applicability dates.
- Treas. Reg. §Treas. Reg. §1.962-3 Treatment of actual distributions
- Treas. Reg. §Treas. Reg. §1.962-3(a) In general.
- Treas. Reg. §Treas. Reg. §1.962-3(b) Rules of application.
- Treas. Reg. §Treas. Reg. §1.962-3(c) Treatment of shareholder's successor in interest—(1) In general.
- Treas. Reg. §Treas. Reg. §1.962-3(i) §1.962-3(i)
- Treas. Reg. §Treas. Reg. §1.962-3(v) Evidence showing that the section 962 earnings and profits for which an exclusion is claimed are attributable to amounts which were included in the gross income of a United States shareholder under section 951(a) subject to an election under § 1.
7 Citing Cases
In sum, we hold that Memcorp HK's distribution of$12,307,591 oftaxable 962 E&P to petitioners was not QDI under section 1(h)(11)(B) but rather consti- tuted an ordinary dividend taxable at ordinary-income rates.
5 Section 960 applies only to domestic corporations (not to a domestic partnership like EW LLC or to foreign corporations like the upper tier CFC partners), a point confirmed by section 962, which gives a United States shareholder who is an individual the opportunity to elect to be taxed a domestic corporation.