Is Section 988 a Subpart F?

Is Section 988 a Subpart F?

In addition to the basic rules above, the subpart F regulations allow taxpayers to make certain elections with respect to § 988 gains and losses of CFCs.

How is Section 988 income taxed?

Section 988 taxes FOREX gains and losses like ordinary income, which is at a higher rate than the capital gains tax for most earners. An advantage of Section 988 treatment is that any amount of ordinary income can be deducted as a loss, where only $3,000 in capital gains losses can be deducted.

What are section 988 transactions?

What is a Section 988 transaction? Generally, it is a transaction where the amount that the taxpayer is entitled to receive or required to pay is determined in a currency other than the functional currency of the taxpayer or is determined in reference to the value of one or more nonfunctional currencies.

Where does section 988 income get reported?

If the taxpayer is an investor, he reports that ordinary gain or loss on line 21 of Form 1040 (Other Income or Loss). If the taxpayer qualifies for trader tax status (business treatment), he reports the Section 988 ordinary gain or loss on Form 4797, Part II ordinary gain or loss.

Is Section 988 an ordinary income?

Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).

What is a subpart F income?

What is Subpart F Income? Income generated Controlled Foreign Corporations (CFCs) by the United States government is called as Subpart F Income. CFCs are foreign subsidiaries with more than 50% stake controlled by entities in the United States, and taxed as per the Subpart F code of the US Tax code laws.

Does section 988 apply to individuals?

The Code Sec. 988 rules do not apply to a personal transaction (i.e., any transaction entered into by an individual, unless the expenses properly allocable to it qualify as deductible business or investment expenses), unless the gain that would otherwise be recognized exceeds $200.

Is income under Subpart F taxable?

Essentially, Subpart F Income involves CFCs (Controlled Foreign Corporations) that accumulate certain specific types of income (primarily passive income). When a CFC has Subpart F income under IRC Section 952, that means the U.S. shareholders may have to pay tax on the earnings.

How do you calculate Subpart F?

A CFC calculates subpart F income by adding its adjusted net foreign base company income to its adjusted net insurance income. The two main components of subpart F income, adjusted net foreign base company income and adjusted net insurance income, are determined under specific rules and a multi-step process.

What is subpart F income with example?

Subpart F income includes: insurance income, foreign base company income, international boycott factor income, illegal bribes, and income derived from a §901(j) foreign country, which are countries that sponsor terrorism or are otherwise not recognized by the US, such as Iran and North Korea.