A common issue in this context is whether a partnership that sells an interest in a publicly traded domestic corporation
is eligible for the publicly traded exception under Sec.
Section 1503(d) of the Code provides that, to the extent provided in regulations, any loss of a separate unit of a domestic corporation
will be subject to the DCL rules in the same manner as if it were a wholly owned subsidiary.
Withholding is not required on dispositions of USRPIs by domestic partnerships, trusts, and estates, and on distributions of USRPIs by foreign corporations if, prior to the transfer, the entity or fiduciary obtains a statement issued by the domestic corporation
An option or similar interest in a domestic corporation
(or a domestic or foreign partnership) will be treated as stock of the domestic corporation
(or an interest in the partnership) with a value equal to the holder's claim on the equity of the domestic corporation
immediately before the acquisition (the deemed exercise rule) (Temp.
In this study, a foreign-owned domestic corporation
is 25% or more owned at some time during the year by a single foreign shareholder, generally a foreign parent corporation.
The ownership test is met if, under a plan or a series of related transactions, former shareholders of a domestic corporation
own at least 60% of the stock of a foreign acquiring corporation by reason of holding stock in the domestic corporation
ii) [USRPI means] any interest (other than an interest solely as a creditor) in any domestic corporation
unless the taxpayer establishes (at such time and in such manner as the Secretary by regulations prescribes) that such corporation was at no time a United States real property holding corporation during the shorter of--
1503(d) to separate units of domestic corporations
and to grant Treasury authority to promulgate regulations to prevent avoidance of the DCL rules by contributing assets to a corporation with a DCL after the loss was sustained.
The result of such an "inversion" is that the foreign acquiring company becomes a surrogate foreign corporation with respect to the domestic corporation
or partnership that is the expatriated entity.
6) Regardless of whether the domestic corporation
is a general or limited partner in the partnership, the focus should be on who has the core incident of ownership -- the right to vote the foreign shares.
Although Quiggley is a domestic corporation
otherwise eligible to be a QSub, no QSub election has been made for it.
OBRA did not, however, change the definition of "United States property"; that term continues to be defined as any property acquired after December 31, 1962, which is (i) tangible property located in the United States, (ii) stock of a domestic corporation
, (iii) an obligation of a United States person, or (iv) certain intangible rights such as copyrights and patents.