US Tax Court rules transactions between related companies create “United States property”

The US Tax Court has ruled that transactions between a US parent and its controlled foreign corporations (CFCs) gave rise to “United States property” under section 956(c)(1)(C) and thus the parent must include amounts in its gross income.

Partially granting the IRS’s summary judgement motion in Crestek, Inc. v. Commissioner, 149 T.C. No. 5 (July 27, 2017), Judge Albert Laubner concluded that amounts constituting United States property were an outstanding intercompany loan balance owed by a domestic subsidiary to a CFC, a CFC’s a guarantee of the domestic subsidiary’s loan and the direct or indirect pledge of asset held as security for that loan, and trade recievables held by the CFC.



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