Apr 1, 2008 12:00 PM

By Elyse G. Kirschner

Tax professionals increasingly are providing advice for clients who are U.S. beneficiaries of foreign trusts. These clients may be subject to tax on income earned by, or from, controlled foreign corporations (CFCs) and passive foreign investment companies (PFICs) whose shares are held in trust. Both of these regimes, also known as “anti-deferral regimes,” reduce the deferral (or the benefits of deferral) of U.S. income tax that generally exists for U.S. shareholders of domestic corporations.¹

These anti-deferral regimes require that certain types of passive income of CFCs or PFICs be taxed to their U.S. shareholders, or impose punitive U.S. tax on income derived from disposing of shares in or receiving distributions from such corporations. It's incumbent on tax advisors to make their foreign trust clients aware of the CFC and PFIC rules whenever appropriate. Indeed, advisors may want to help such clients avoid the imposition of tax on their U.S. beneficiaries under these regimes altogether by restructuring the foreign trusts or the trusts' holdings of foreign corporations to the extent possible.²

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

Click here to download the 2011 Trust Glossary

50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

Click here to view the most up to date guide (September 2011)

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