LOST IN SPACE
Professor and Mrs. John Robinson
Jupiter 2 Spacecraft
Lost in Space, en route from Alpha Centauri
Re: GILTI/Subpart F/US real estate
Dear Professor Robinson:
I understand that you, your lovely wife (the glamourous June Lockhart) and the children are thinking about heading back to Alpha Centauri in your Jupiter 2 spaceship after a few years of cheesy intergalactic wandering on black and white TV and a 1998 movie remake (sans, in the movie, the aluminum foil costumes and June Lockhart). Now that the plastic action figures from your movie remake are showing up in dollar stores, you've decided to use your intergalactic contacts and technology to "launch" a new career as an entrepreneur.
You have asked for a big picture summary of applicable Alpha Centauri tax rules that apply to inter-planetary transactions.
We are assuming that you will base your operations on Alpha Centauri, whose tax rules are identical to those of the United States.
With regard to that new business you plan to start on the Planet of the CFCs, we first need to work through your subpart F and GILTI issues.
You are sending Galactic Gladiator to PLANET OF THE CFCS to provide plundering and pillaging services to local leadership on that planet. The question we need to wrestle with is whether the tribute income paid to Galactic Gladiator in exchange for his plundering and pillaging services will be taxable to you even if you never teleport Galactic Gladiator’s earnings back to Alpha Centauri.
In other words, would the income be any of the following:
1. subpart F income,
2. GILTI income or
3. income derived from real property located on PLANET OF THE CFCS
(We agree, by the way, that because of the [admittedly remote] chance that plundering and pillaging may trigger lawsuits from its victims, that you will conduct business on POTCFC through a corporate subsidiary organized on that planet. For now, let’s call it Gladiator GmbH)
Stay tuned for next week’s episode…
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