Page 748 - Large Business IRS Training Guides

Example 4:
Foreign income taxes deemed paid under
section 960(a)(3) or
section 960(b) with respect to
distributions
of section 965(a) PTEP

• The facts are the same as the prior slide.
• In addition:
• In 2017, CFC2 distributes $200 to CFC1

X
subject to a Country withholding tax (wht)

of $20, but not subject to Country Y tax.
• In 2017, CFC1 distributes $180 to USP

which is not subject to a Country Y wht.

deemed to pay the $20 wht paid by
• USP i s
CFC1. Section 960(a)(3).
• USP is only allowed to credit $7.15 of that
$20 wht. ($20 * (1-64.26%))

• If CFC2 instead made the distribution and

withheld the tax after 2017, and CFC1 made a
distribution to USP, USP would only be allowed

a credit of $7.15 (Section 960(b)).
• If instead, CFC2 made the distribution and

withheld the tax in 2017, and CFC1 made the
distribution in 2018, USP would only be allowed

a credit of $7.15 (Section 960(b)).

70