Cross-border equipment leasing: recent developments related to section 168(g)

Article Abstract:

Congress should amend IRC section 168(h) to establish that foreign sales corporation (FSC) leases are not subject to the depreciation limitations of section 168(g). When section 168(g) was enacted, US investors began using FSCs in replacement lease arrangements with shortened depreciation periods to compensate for depreciation limitations. 1996 final regulations under IRC section 168(g) disallowed replacement leases in the FSC context. To promote international economic competitiveness, Congress should exempt FSC leases from 168(g) depreciation limitations.

Public Finance Activities, Corporate Tax Deductions & Exemptions, Misc. Equipment Rental & Leasing, Equipment Leasing & Rental, Rental and Leasing Services, United States, Corporate taxes, Equipment rental, Depreciation, international

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Structuring and taxing the FSC leasing transaction

Article Abstract:

Foreign sales corporations (FSCs) must meet transactional and structural requirements to receive tax benefits such as exemption from taxation as foreign source income. FSC transactions can take the form of leases, and the structure of the lease depends on whether the FSC is an ownership FSC or is a commission FSC. FSC status also has implications for depreciation and dividend distributions. Transfer price regulations are also relevant to the proper reporting of the values of FSC transactions.

Income tax

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Forming a foreign sales corporation can shield rental income from tax

Article Abstract:

US exporters involved in international leasing have used the structure of the foreign sales corporation (FSC) for tax benefits. After certain requirements are met, a percentage of the FSC's income is exempt from US income tax. The FSC must meet structural requirements including those concerning place of incorporation, shareholder constituency and outstanding stock. The FSC must meet other requirements concerning foreign participation and management as well as export income.

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