Deemed Dividend Analyzer

A "deemed dividend" problem occurs when an affiliate of a U.S. borrower can't provide credit support for the borrower's debt without triggering negative tax consequences under Section 956 of the Internal Revenue Code.

With the help of a corporate structure chart, answer a few simple questions to see what level of credit support any affiliate can provide a U.S. borrower without triggering a deemed dividend.

Is the affiliate a foreign corporation?

Note: If you're not sure, treat an entity as a "foreign corporation": (1) if it's organized in a foreign country (unless you have reason to think it's "disregarded" or treated as a partnership for U.S. tax purposes), (2) if it is "disregarded" or a partnership and its immediate parent is a foreign corporation, or (3) just to be conservative, if it holds no material assets other than shares in other foreign corporations.