Obscure Provision of New Tax Act Complicates Testamentary Tax Planning for Nonresidents with U.S. Beneficiaries

The new Tax Cuts and Jobs Act eliminates the 30-day window U.S. shareholders of a foreign corporation had to sell their shares before it became a controlled foreign corporation (CFC) following the death of a non-resident owner. By liquidating their portion of held shares within 30 days, shareholders with a stepped-up basis could avoid negative U.S. tax consequences. The new result after the passage of tax reform is potential burdensome taxation for the new U.S. shareholder. Though difficult, this outcome can be avoided by churning appreciated stock in the foreign corporation. 

See Charles Rubin, Obscure Provision of New Tax Act Complicates Testamentary Tax Planning for Nonresidents with U.S. Beneficiaries, Rubin On Tax, January 15, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.