INSIGHT: Impact of International Tax Reform Provisions on International Estate PlanningMarch 21, 2018
The Tax Cuts and Jobs Act (formally known as “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115-97), signed into law on Dec. 22, 2017, (the 2017 tax act) contains sweeping provisions that drastically change the international provisions of the U.S. tax code. This article examines one seemingly minor—but far-reaching—change to the Subpart F rules in the context of international estate planning: the change that eliminates the requirement that a foreign corporation be a controlled foreign corporation for an uninterrupted period of 30 days or more in order for U.S. shareholders of the corporation to be required to include certain income of the foreign corporation (even if not distributed). This change in law places increased pressure on pre-death planning for nonresident aliens with U.S. heirs, and may also provide for renewed attention to the effect of the check-the-box rules on the federal estate tax regime. This article first details the change in law under the 2017 tax act and its application to international estate planning. It then examines planning alternatives and also provides an in-depth analysis of the interaction of the check-the-box rules and U.S. transfer taxes.
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