Subpart F Income

Subpart F income refers to certain types of income earned by controlled foreign corporations (CFCs), which are foreign companies controlled by U.S. shareholders. The U.S. tax system requires American shareholders to pay taxes on this income currently, even if they don't receive any money from the foreign company. This rule aims to prevent U.S. taxpayers from avoiding taxes through offshore entities. Subpart F income includes items like passive income (e.g., dividends, interest, royalties) and income from related-party transactions, ensuring these profits are taxed in the U.S., promoting fair taxation of global earnings.