Check The Box Election Foreign Entity

The election is commonly referred to as a check the box election because you put a check in the box on the form next to the entity classification you have chosen for your company.

Check the box election foreign entity. For foreign entities the tax implications of making this type of election can be significant so we encourage you to seek proper tax planning advice. In short a check the box election is an entity classification election that is made on i r s. Form 8832 entity classification election.

Tax treatment of those foreign earnings. The possibility that the check the box rules would greatly expand the potential for such strategies had been pointed out prior to implementation and at one point some commentators suggested disallowing foreign entities from electing their classification at all. For some the election can garner a current benefit from foreign losses and provide relief from the indirect foreign tax credit limitations.

A check the box election will avoid the attribution of income under cfc rules or the loss of long term capital gains tax rate discounts when shares are transferred in a passive foreign investment company pfic. You simply check the appropriate box specify the date that the election is to be effective sign and file the form. Tax purposes as a corporation partnership or disregarded entity and whether a check the box election would be advisable and how the tax items attributable to the foreign business may impact the u s.

301 7701 3 c to classify a foreign eligible entity that is a qualified entity as a partnership or disregarded entity as an election to be treated as a partnership or disregarded entity as appropriate rather than as an association taxable as a corporation if the requirements of rev. The most basic reason for making the check the box election is to ensure that the owner of the corporation in the us is properly credited with the foreign tax payments. The procedure to make a check the box election is quite easy.

It s important to note that the election if not made to correspond with the company s incorporation or creation date can trigger u s. A check the box election allows foreign corporations to elect their us tax status when the us tax system becomes relevant to them. Entity classification regulations were promulgated in 1997 by the internal revenue service irs under internal revenue code section 7701.

Person should also examine how each option would be treated for u s. The entity s default classification applies if the form is not filed. Taxpayers should weigh the benefits and detriments of making a check the box election for a foreign eligible entity.