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Subpart F

International Transfer from Foreign Entities to Foreign Tax Credit Parents and to Form 1118

Transfer of Income Inclusion Sourcing

At the FTC entity level, Subpart F inclusions in a foreign basket are reclassified to the U.S. basket if distributed from the foreign corporation's 959(c)(3) U.S. source earnings, provided the FTC ownership (by one or more entities) of the foreign corporation is at least 50%. This reclassification appears on the Summary Report for U.S. Shareholders and the Foreign Income Inclusion reports. If the International Transfer is used to automate the population of tax adjustments and income sourcing in the FTC parents, U.S. source income inclusions and the related Section 78 gross-ups will be allocated to source code 1 - U.S. Income while foreign source income will be allocated to foreign basket source codes. If the FTC ownership requirement is not met, the income and gross-up will be sourced to the foreign basket regardless of the U.S./Foreign categorization in the foreign entity.
Automated sourcing of Section 956 inclusions, actual dividends and the related Section 78 gross-ups will be allocated to source code 1 - U.S. Income if the distributions originated from the foreign entity's 959(c)(3) U.S. source earnings, provided the foreign entity is owned 50% or more by FTC companies and the 904(h) exception (less than 10% of current year earnings are U.S. source) has not been met. Otherwise, the income and gross-ups are allocated to foreign basket source codes. Use the Summary Report for U.S. Shareholders and the Foreign Income Inclusion reports to review the information transferred.

Transfer of Deemed Paid Credits to Foreign Income Taxes

The total deemed paid credits (U.S. and foreign source) related to distributions received by the FTC entities are transferred to the foreign baskets.

Transfer of Deemed Paid Credits to Form 1118 Schedules C, D and E

The total deemed paid credits (U.S. and foreign source) related to distributions received by the FTC and upper-tier foreign parents are transferred to the foreign baskets during International
Compute > Transfer to US1118
.

This article applies to:

  • PRODUCT: ONESOURCE Income Tax
  • Return type: international

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