26 USC 1294 - Election to extend time for payment of tax on undistributed earnings

Collapse to view only § 1294. Election to extend time for payment of tax on undistributed earnings

§ 1293. Current taxation of income from qualified electing funds
§ 1294. Election to extend time for payment of tax on undistributed earnings
§ 1295. Qualified electing fund

§ 1293. Current taxation of income from qualified electing funds

(a) Inclusion

(1) In generalEvery United States person who owns (or is treated under section 1298(a) as owning) stock of a qualified electing fund at any time during the taxable year of such fund shall include in gross income—

(A) as ordinary income, such shareholder’s pro rata share of the ordinary earnings of such fund for such year, and

(B) as long-term capital gain, such shareholder’s pro rata share of the net capital gain of such fund for such year.

(2) Year of inclusion

(b) Pro rata share

(d) Basis adjustmentsThe basis of the taxpayer’s stock in a passive foreign investment company shall be—

(1) increased by any amount which is included in the income of the taxpayer under subsection (a) with respect to such stock, and

(2) decreased by any amount distributed with respect to such stock which is not includible in the income of the taxpayer by reason of subsection (c).

A similar rule shall apply also in the case of any property if by reason of holding such property the taxpayer is treated under section 1298(a) as owning stock in a qualified electing fund.

(e) Ordinary earningsFor purposes of this section—

(1) Ordinary earnings

(2) Limitation on net capital gain

(3) Determination of earnings and profits

(f) Foreign tax credit allowed in the case of 10-percent corporate shareholderFor purposes of section 960—

(1) any amount included in the gross income under subsection (a) shall be treated as if it were included under section 951(a),

(2) any amount excluded from gross income under subsection (c) shall be treated in the same manner as amounts excluded from gross income under section 959, and

(3) a domestic corporation which owns (or is treated under section 1298(a) as owning) stock of a qualified electing fund shall be treated in the same manner as a United States shareholder of a controlled foreign corporation (and such qualified electing fund shall be treated in the same manner as such controlled foreign corporation) if such domestic corporation meets the stock ownership requirements of subsection (a) or (b) of section 902 (as in effect before its repeal) with respect to such qualified electing fund.

(g) Other special rules

(1) Exception for certain incomeFor purposes of determining the amount included in the gross income of any person under this section, the ordinary earnings and net capital gain of a qualified electing fund shall not include any item of income received by such fund if—

(A) such fund is a controlled foreign corporation (as defined in section 957(a)) and such person is a United States shareholder (as defined in section 951(b)) in such fund, and

(B) such person establishes to the satisfaction of the Secretary that—

(i) such income was subject to an effective rate of income tax imposed by a foreign country greater than 90 percent of the maximum rate of tax specified in section 11, or

(ii) such income is—(I) from sources within the United States,(II) effectively connected with the conduct by the qualified electing fund of a trade or business in the United States, and(III) not exempt from taxation (or subject to a reduced rate of tax) pursuant to a treaty obligation of the United States.

(2) Prevention of double inclusion

(Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2569; amended Pub. L. 100–647, title I, § 1012(p)(15), (18), (23), (32), Nov. 10, 1988, 102 Stat. 3518, 3519, 3521; Pub. L. 103–66, title XIII, § 13231(c)(3), Aug. 10, 1993, 107 Stat. 498; Pub. L. 105–34, title XI, § 1122(d)(3), Aug. 5, 1997, 111 Stat. 977; Pub. L. 115–97, title I, § 14301(c)(35), Dec. 22, 2017, 131 Stat. 2224.)

§ 1294. Election to extend time for payment of tax on undistributed earnings

(a) Extension allowed by election

(1) In general

(2) Election not permitted where amounts otherwise includible under section 951

(b) Definitions

For purposes of this section—

(1) Undistributed PFIC earnings tax liability

The term “undistributed PFIC earnings tax liability” means, in the case of any taxpayer, the excess of—

(A) the tax imposed by this chapter for the taxable year, over

(B) the tax which would be imposed by this chapter for such year without regard to the inclusion in gross income under section 1293 of the undistributed earnings of a qualified electing fund.

(2)

The term “undistributed earnings” means, with respect to any qualified electing fund, the excess (if any) of—

(A) the amount includible in gross income by reason of section 1293(a) for the taxable year, over

(B) the amount not includible in gross income by reason of section 1293(c) for such taxable year.

(1) Distributions

(A) In general

(B) Ordering rule

(2) Transfers, etc.

If—

(A) stock in a passive foreign investment company is transferred during the taxable year, or

(B) a passive foreign investment company ceases to be a qualified electing fund,

all extensions under subsection (a) for payment of undistributed PFIC earnings tax liability attributable to such stock (or, in the case of such a cessation, attributable to any stock in such company) which had not expired before the date of such transfer or cessation shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for the taxable year in which such transfer or cessation occurs. To the extent provided in regulations, the preceding sentence shall not apply in the case of a transfer in a transaction with respect to which gain or loss is not recognized (in whole or in part), and the transferee in such transaction shall succeed to the treatment under this section of the transferor.

(3) Jeopardy

(d) Election

(e) Authority to require bond

(f) Treatment of loans to shareholder

(g) Cross reference

(Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2570; amended Pub. L. 100–647, title I, § 1012(p)(4), (8), (25), (34), Nov. 10, 1988, 102 Stat. 3515, 3517, 3519, 3522; Pub. L. 108–357, title IV, § 413(c)(25), Oct. 22, 2004, 118 Stat. 1509.)

§ 1295. Qualified electing fund

(a) General ruleFor purposes of this part, any passive foreign investment company shall be treated as a qualified electing fund with respect to the taxpayer if—

(1) an election by the taxpayer under subsection (b) applies to such company for the taxable year, and

(2) such company complies with such requirements as the Secretary may prescribe for purposes of—

(A) determining the ordinary earnings and net capital gain of such company, and

(B) otherwise carrying out the purposes of this subpart.

(b) Election

(1) In general

(2) When made

(Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2571; amended Pub. L. 100–647, title I, § 1012(p)(37)(A), title VI, § 6127(a), Nov. 10, 1988, 102 Stat. 3522, 3715.)