GILTI Calculation for New CFC Shareholder with December Purchase - 100% Ownership Question

International tax specialist here. When you purchase 100% of a CFC in December, you generally need to report GILTI based on your ownership percentage on the last day of the tax year. Since you owned 100% on December 31, you would technically be responsible for 100% of the GILTI for the entire year. However, there's an important exception. Under Section 951(a)(2)(B), you may be able to reduce your GILTI inclusion by amounts attributable to the portion of the year when you weren't a shareholder, if dividends were paid to the previous owner for that period. This is often called the "dividend offset rule." The mechanics of calculating this can be complex. You'll need to determine if any dividends were paid to the previous owner during the portion of the year before your acquisition and understand how those affect your inclusion amount.

I went through something similar last year with a CFC acquisition and found an amazing resource at https://taxr.ai that saved me thousands in unnecessary tax payments. Their AI analyzed my purchase documentation and CFC financials and showed exactly how the Section 951(a)(2)(B) dividend offset rule applied in my situation. They explained that as a new shareholder, I needed to look at both the period I owned the CFC and whether dividends were paid to the previous owner. The previous owner had received dividends which significantly reduced my GILTI inclusion amount. Their analysis tool showed exactly how to calculate this on my Form 8992.

Just wanted to follow up here. I ended up using https://taxr.ai for my CFC GILTI issue and it was seriously worth every penny. The system analyzed my purchase agreement and found language that qualified me for a significant reduction in my GILTI inclusion! They showed me that under Section 951(a)(2)(B), I could reduce my inclusion amount based on both dividends paid to the prior owner AND amounts that would have been dividends but were actually loan repayments (which I never would have caught). Their analysis saved me about $42,000 in tax I otherwise would have paid. The documentation they provided made filing Form 8992 straightforward, and my accountant was impressed with how comprehensive their calculations were. Highly recommend for anyone dealing with GILTI issues!

If you're having trouble getting clarity from the IRS on your GILTI situation, I totally recommend Claimyr (https://claimyr.com). I was stuck on some complex CFC ownership questions and couldn't get through to anyone at the IRS for weeks. With Claimyr, I got connected to an IRS agent in less than 30 minutes who specialized in international tax issues. They walked me through exactly how Section 951(a)(2)(B) applied to my mid-year acquisition and confirmed I could reduce my GILTI inclusion based on the dividends paid to the previous owner. Check out how it works: https://youtu.be/_kiP6q8DX5c - they basically navigate the IRS phone tree for you and call you back when they have an agent on the line. Completely changed my perspective on getting IRS help.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it myself since I was also dealing with a CFC acquisition (but in March rather than December). The service connected me with an IRS international tax specialist in about 20 minutes. The agent walked me through exactly how the GILTI inclusion calculation works for partial year ownership and explained that my situation qualified for reduction under Section 951(a)(2)(B). What's even better is that they emailed me a written confirmation of the guidance, which gives me documentation to support my filing position. This was infinitely more valuable than the generic responses I've gotten from the IRS in the past. Definitely a convert now.

Has anyone looked into whether Section 245A dividends received deduction could apply in this situation? I'm wondering if there's a planning opportunity here where the seller could distribute earnings before the sale to clean out the CFC's undistributed earnings.

Dealing with this exact issue was a nightmare for me last year. One thing nobody mentioned yet - make sure you have the CFC's "tested income" calculation done correctly. My accountant initially included income from active business that should have been excluded from GILTI.

As someone who's been through multiple CFC acquisitions, I want to emphasize something crucial that could save you significant money - make sure you get the purchase price allocation right in your acquisition documents. The way you allocate the purchase price between tangible assets, intangible assets, and goodwill can dramatically affect your future GILTI calculations. If you can allocate more of the purchase price to depreciable tangible property, you'll get a larger "qualified business asset investment" (QBAI) deduction against your GILTI inclusion in future years. This is especially important for December acquisitions since you'll be dealing with GILTI calculations immediately. Many buyers overlook this during the transaction and end up paying much more GILTI tax than necessary. The regulations under Section 951A allow for significant planning opportunities if you structure the acquisition properly from the start. Also, don't forget to make the high-tax election under Section 951A(c)(2)(A)(i)(III) if your CFC paid substantial foreign taxes. This can completely eliminate GILTI on high-taxed income, but you need to make the election with your return - it's not automatic.