On January 25, 2022, the Internal Revenue Services issued final regulations relating to the treatment of stock owned by domestic partnerships under certain provisions of subpart F of the Internal Revenue Code (“Subpart F”).[1]  These regulations could substantially impact the tax treatment of partners of such partnerships.

Background on Foreign Corporations and the U.S. International Tax System

U.S. citizens, resident aliens, and domestic corporations generally are subject to federal income tax on worldwide income.^[2]

On the other hand, foreign corporations typically are subject to federal income tax only on income 1) that is effectively connected with the conduct of a U.S. trade or business and 2) certain types of U.S. source income.^[3]

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