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Posted by A Wieser on March 6, 2008, 8:32 am
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I've read through all the guidance, and I don't understand section 1 at all.
I guess the thing I don't understand is what "foreign base company" means.
It seems to be defined in section 954 here:
http://www.law.cornell.edu/uscode/26/usc_sec_26_00000954----000-.html
I can't work out whether interest earned by the company goes in box 1a, or
whether it's only certain types of interest?
Similarly, "foreign base company sales income" on line 3. Is that all sales
income of the company, or is it just sales of items that are somehow
connected to me.
Can anyone here enlighten me?
Thanks.
Tony
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Posted by jmail7 on March 6, 2008, 9:40 pm
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> I guess the thing I don't understand is what "foreign base company" means.
There is no such thing as a foreign base company. There is only
foreign base company income. One of the types of foreign base company
income is foreign personal holding company income (or "FPHCI").
> I can't work out whether interest earned by the company goes in box 1a, or
> whether it's only certain types of interest?
Generally, all interest is treated as FPHCI unless it is certain
interest from related parties. Although I have calculated subpart F
income for thousands of companies, I have never filled out Worksheet
A. I assume that the interest would be included on the worksheet.
> Similarly, "foreign base company sales income" on line 3. Is that all sales
> income of the company, or is it just sales of items that are somehow
> connected to me.
Generally, foreign base company sales income only includes income
related to purchase and sales of personal property from or to related
parties.
Andrew
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2007) - All rights reserved. >>
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Posted by A Wieser on March 7, 2008, 10:04 am
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Thanks for taking the time to reply. I've been fobbed off by the IRS when
trying to get information about this from the Philadelphia office. "Sorry,
that's way beyond our level of training." I was told.
> There is no such thing as a foreign base company. There is only
> foreign base company income. One of the types of foreign base company
> income is foreign personal holding company income (or "FPHCI").
>
So any passive income the CFC receives is considered FPHCI (if I understand
you correctly).
>> I can't work out whether interest earned by the company goes in box 1a,
>> or
>> whether it's only certain types of interest?
>
> Generally, foreign base company sales income only includes income
> related to purchase and sales of personal property from or to related
> parties.
>
And sales of products manufactured by the company then probably don't go on
line 3.
Is it the case that line 8, (Gross foreign base company income) is the total
of all sales, service, oil, and passive income, including those listed on
line 1 (FPHCI)?
If so, FPHCI is less than 5% of line 8, and less than $1 million, so I enter
zero on line 11, and skip to line 22 (assuming the skipped lines count as
zero), that gives me subpart F income of 0.
Does that sound correct, given the assumptions above?
Tony
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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