Unscientific polling of professionals preparing returns for individual U.S. shareholders resident in the lower mainland of British Columbia has revealed an almost universal reliance on the §962 election.
For individual U.S. shareholders owning shares of CFCs, the relative advantages and disadvantages of the different responses to the high cost of the GILTI tax are largely unchanged by the recent developments. As discussed in this article, forming a domestic corporate blocker now has the added advantage of facilitating investments in U.S. property (including loans to U.S. persons from the CFC) without incurring a tax under §956. Particularly for individual U.S. shareholders residing in the United States, the corporate blocker alternative has become more compelling.
This author’s informal and completely unscientific polling of professionals preparing returns for individual U.S. shareholders resident in the lower mainland of British Columbia has revealed an almost universal reliance on the §962 election. That election is effective to significantly reduce the GILTI tax to which the individual U.S. shareholder would be subject but still leaves the GILTI of the CFC subject to a 10.5% rate. The Canadian corporate rate is often high enough to allow 100% of the GILTI tax to be creditable in computing the Canadian income tax liability of the CFC.30
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The United States revenue laws are constantly changing. Although professional advisors in Canada are familiar with the United States tax system, the nuances of a constantly evolving tax system complicate planning undertaken for clients with cross-border activities. WardChisholm, LLP works with these professionals to enable them to assist their clients with confidence that U.S. tax, business, estate planning, and asset protection issues are properly addressed by a firm whose attorneys have decades of experience advising clients regarding the intricacies of the U.S. tax system.
Submitted by Robert E. Ward, Managing Partner, WardChisholm, LLP