However, if an interest in a publicly traded partnership or trust was owned by a foreign person with a greater than 5% interest at any time during the previous five-year period, then that interest is a USRP interest (if the partnership or trust would otherwise qualify as a USRPHC
if it were a corporation), and the disposition is subject to withholding (Regs.
33) Insofar as the direct transfers by foreigners of shares of USRPHCs
are concerned, therefore, the United States has developed a system of law and administration for enforcing a (high) tax that is arguably as respectable and "serious" as one can find anywhere in the world.
Nevertheless, because the long party in an equity swap with respect to the stock of a USRPHC is entitled to receive all of the appreciation in the underlying property, the IRS may argue that the investor has "a right to share in the appreciation" in the underlying property.
With regard to an equity swap on non-actively traded property, however, such as the stock of a non-publicly traded USRPHC, the analysis is slightly different.
Even if the IRS can successfully argue that Code [section] 897 should apply to a long position in a swap with respect to the stock of a USRPHC, a non-U.
A USRPHC or former USRPHC that chooses to withhold only under Sec.
897(c)(1) establishes a statutory presumption that any interest (other than an interest solely as a creditor) in any domestic corporation is a USRPI unless the taxpayer establishes that the domestic corporation is not and was not a USRPHC during the relevant time frame.
Thus, to mitigate the risk of withholding (and interest and penalties), if the domestic corporation is a USRPHC or a former USRPHC, it must obtain a withholding certificate.
6) Also, a domestic corporation generally is presumed to be a USRPHC unless the taxpayer establishes that such corporation was at no time a USRPHC during the relevant period (i.
A domestic corporation generally will be considered a USRPHC if the fair market value (FMV) of the USRPIs held by the domestic corporation on any applicable determination date equals or exceeds 50% of the sum of the FMV of its USRPIs, its interests in real property located outside the United States, and any other of its assets used or held for use in a trade or business.
Thus, the controlled corporation's liquid assets are disregarded entirely for purposes of determining whether the controlling corporation is a USRPHC.
corporations typically want to avoid USRPHC status.