Selling Foreign Subsidiaries Without Tax Cost

Gain on the sale of stock in a foreign subsidiary generally is subject to U.S. taxation.  This is the case whether the stock is sold by a U.S. parent or by an intermediate foreign holding company.  When sold by a foreign holding company, the U.S. Subpart F rules treat the gain on the sale of the stock as a deemed dividend to the U.S. parent subject to U.S. taxation.