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Temporarily working in US from a CFC I am a US citizen and

Temporarily working in US from...
Temporarily working in US from a CFC

I am a US citizen and have a controlled foreign corporation outside the US, in Asia. All assets and development are outside the US. However, I plan to come home for Christmas to the US for a month. If I work on my laptop while in the US for my controlled foreign corporation, does this mean my profit that month is taxable to the US federal gov? There is no tax treaty between the US and the resident nation of my company.
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Answered in 1 day by:
9/4/2011
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

There is a possibility that it can be taxable. As a U.S. citizen, you are taxed on your worldwide income, whether you are working on U.S. soil or elsewhere. If you have income, you are supposed to file a U.S. Tax return and report all income sources. However, even though no treaty exists between the U.S. and the resident nation of your company, you may still qualify for the Foreign Earned Income Exclusion if you meet the qualifications. SEE BELOW:

web page link:

http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

Foreign Earned Income Exclusion
IRS Form 2555
http://www.irs.gov/pub/irs-pdf/f2555.pdf (2010 Form, 2011 Form not available yet).

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If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction.

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011). In addition, you can exclude or deduct certain foreign housing amounts.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, and Publication 15-B, Employer's Tax Guide.
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Hello again,

My apologies, after answering, I realized that you have a CFC. This is a revision to my previous answer. Disregard previous answer.

The U.S. has no taxing authority over a foreign corporation with no U.S. source income and no permanent establishment in the U.S. However, the U.S. tax laws do have taxing authority over U.S. shareholders (as defined below) of foreign corporations.

Description of Subpart F Income

Subpart F income is defined under IRC Sections 952 - 954. The following is a general summary of the income that is classified under subpart F. Basically, "U.S. source income" means income derived from conducting a trade or business in the U.S., income from services performed in the U.S. and income from property located in the U.S. It also includes dividends on the stock of U.S. corporations and interest on bonds or other evidences of debt from U.S. sources. (There
are exceptions of course.)

Based on the above, if you derive income from the work that you do in the U.S. while you are here, then that income would be taxable.

Tax.appeal.168
Tax.appeal.168, Tax Accountant
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As I will be heading out to go sailing soon, if you require additional info, I will respond to you upon my return to the computer. In the meantime, you can refer to the following regarding your matter:

http://www.avcadvisory.com/documents/pdf/CFC.pdf

Thank you.
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