Participation Exemption System Changes Paradigm for CFC Spinoffs - McDermott Will & Emery

Participation Exemption System Changes Paradigm for CFC Spinoffs

Overview


 

Jay Singer said at a Federal Bar Association Section on Taxation conference in Washington that, under the new tax law, the traditional thinking that companies may structure spinoff transactions to convert dividend income to capital gainsmay no longer apply in the context of controlled foreign corporation (CFC) spinoffs because dividends paid to US corporate shareholders would not be subject to tax while the capital gains onthe disposition of CFC stock would still be taxed.