Page 32 - International Taxation IRS Training Guides

Basic
Distribution Rules

Example: Taxable
Dividend Distribution

U.S.P.
$200 basis in CFC-1

$100

CFC-1 $100 E&P
$100 Cash

Rules for corporate distributions:
 Basic

1 - § 301(c)(1) – Dividend to the extent of Earnings & Profits (E&P) (taxable);
st
2 nd - § 301(c)(2) – Return of basis to the extent thereof (non-taxable); and

3 - § 301(c)(3) – Gain from the sale or exchange of property (taxable).
rd

 Note – because CFC-1 has $100 E&P, the $100 distribution

section 301(c)(1).
is a taxable dividend distribution under

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