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.
Generally, the corporation can make this certification only if (1) the corporation was not a USRPHC during the previous five years (or, if shorter, the period the interest was held by its present owner), or (2) as of the date of disposition, the interest in the corporation is not a USRP interest by reason of Sec.
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.
Given that the investor's long position in the swap is equivalent economically to a leveraged purchase of the underlying stock in the USRPHC, the issue arises whether Code [section] 897 applies to the investor when such position is disposed of 2 The IRS could assert two alternative arguments in attempting to apply Code [section] 897 to the investor's long position in the swap 1) the investor's position in the swap is itself a USRPI, or 2) that the investor should be treated as owning the underlying USRPHC stock under common law principles.
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.
In general, a distribution from a USRPHC or a former USRPHC is subject to the withholding provisions of both Sec.
A USRPHC or former USRPHC that chooses to withhold only under Sec.
897 when an NRA or foreign corporation sells stock of a domestic corporation, focusing primarily on when a domestic corporation is treated as a USRPHC and the requirements needed to establish that such an entity is not a USRPHC.
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.
Specifically, for purposes of determining whether a corporation is a USRPHC, if a (controlling) corporation holds a controlling interest in a second (controlled) corporation:
Thus, the controlled corporation's liquid assets are disregarded entirely for purposes of determining whether the controlling corporation is a USRPHC.