Bloomberg Law Quotes David Rosenbloom: Tax Loophole Could Let Wealthy Tap 21% Corporate Rate

In an obscure tax provision -- signed into law by President John F. Kennedy -- designed to prevent Americans from indefinitely shielding themselves from taxes by keeping investments offshore, could let wealthy individual investors seize for themselves the largest corporate tax cut in U.S. history.

The provision forced taxpayers to pay taxes annually on these investments, but gave them the option to have that income taxed at the corporate rate instead of at individual rates. For the past few decades, investors have had little reason to pick the corporate rate, since it was nearly the same as the top personal rate.
But that all changed in December, when Trump's tax law slashed the corporate rate to 21 percent -- 16 percentage points lower than the top federal individual income tax rate.

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IRS Case

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The corporate loophole may ultimately be best suited for the wealthiest investors who don't actually need access to the money, said David Rosenbloom, a tax attorney for Caplin & Drysdale in Washington.

“You pay corporate taxes but you can't get your hands on the money,” Rosenbloom said.

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Excerpt taken from the article “Tax Loophole from 1960s Could Let Wealthy Tap 21% Corporate Rate” by Joe Light for Bloomberg Law’s Daily Tax Report: International.