Rev Proc. 2019-40 provides a Safe Harbor provision for assessing when a foreign corporation is a Controlled Foreign Corporation if the entity could potentially be a controlled foreign corporation with when considering the downward attribution rules. Generally, foreign corporation shareholders do not have to inquire about the ownership interests of other shareholders outside of this common investment in the foreign corporation.
The various proposed regulations address other instances in the statute that were unintentionally impacted by the repeal of Section 958(b)(4). Notable among the items addressed is the impact on Passive Foreign Investment Company (PFIC) determination and the ability to rely on the Fair Market Value of the PFICs assets in making that determination.
For a more specific understanding of the impact this new guidance may have on you please contact our International Tax Services team by filling out the form below.