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Section 962 election A US individual owns a foreign

Section 962 election A US individual...
Section 962 election
A US individual owns a foreign corporation which generates GILTI income.
Can the US individual make a section 962 election (to be taxed at corporate rates) and therefore pay only 21% on GILTI income from his foreign corporation?
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Answered in 22 hours by:
3/15/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,628
Experience: 15years with H & R Block. Divisional leader, Instructor
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An election under Sec. 962 may be made only by a U.S. shareholder who is an "individual" (including a trust or an estate) (Regs. Sec. 1.962-2(a)). Partnerships and S corporations may not make a Sec. 962 election, although partners or S corporation shareholders who are considered U.S. shareholders should be able to make a Sec. 962 election (Rev. Rul. 69-124). For this reason, partnerships and S corporations that have Sec. 951(a) income should consider separately stating and disclosing this information on Schedules K-1, thereby allowing the partners and shareholders to evaluate whether making this election is in their best interest.

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Customer reply replied 1 month ago
if a foreign corporation is held by a US individual directly (no S corporations or partnerships in the middle), can he make the 962 election and they pay only 21% tax on GILTI?

Yes if he is an individual then he would pay less.

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Customer reply replied 1 month ago
Will there be additional tax to pay when the earnings are distributed to that individual? So let's say a foreign corporation generates $1000 GILTI, and no other income. It does not distribute anything to the U.S. individual owner that year. The U.S. individual owner pays $210 (21%) tax. Then next year the foreign corporation distributes the $1000 accumulated earnings to the individual. Would that be tax-free?

That depends

I am going to leave you with the following article

https://www.thetaxadviser.com/issues/2016/feb/foreign-corporation-earnings-and-profits.html

Robin D.
Robin D., Senior Tax Advisor 4
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