Then tax is computed on amounts allocated to each prior year at the maximum rate of tax applicable to the type of taxpayer for such year (prior year tax).
Then interest is computed on such prior year tax as if it were an underpayment of tax (interest charge).
A CFC that elects to convert from a corporation into a partnership or disregarded entity generally would recognize Subpart F income on the deemed liquidation, to the extent it holds property that gives rise to passive investment income (such as stock in subsidiary corporations).
person owning shares, and also separately with respect to shares acquired at different times.Prior to joining Bilzin Sumberg, Josh worked in the tax group of a notable New York law firm.Additionally, he holds a license as a Certified Public Accountant (currently inactive) in the State of Florida.In addition, the gain recognized by A on the deemed liquidation of X is recharacterized as a dividend and subject to tax at the reduced rates applicable to qualified dividend income.As a result, the combination of Section 1248(a) and the retroactive check-the-box rules allows individual U. shareholders of a CFC to convert gain that would be realized upon the sale of the CFC’s assets from subpart F income (taxed as ordinary income at rates up to 39.6 percent) to qualified dividend income (currently taxed at 20 percent).
As a result, the gain would have to be included in A’s gross income as ordinary income.