The throwback tax is the US tax law’s main tool for discouraging tax-free accumulation of income by foreign non-grantor trusts for US beneficiaries. Its complex rules are a dangerous minefield that should be avoided. This article reviews the operation of the throwback tax rules, and assesses the effectiveness of this trust anti-deferral regime in various fact patterns. It also discusses how the trust anti-deferral regime interacts with the US law’s foreign corporation anti-deferral regime, another minefield.

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Shudan Zhou
Shudan Zhou
Partner
Email
shudan.zhou@nortonrosefulbright.com
T: +1 212 318 3086
William G. Cavanagh
William G. Cavanagh
Co-head of Tax, United States
Email
bill.cavanagh@nortonrosefulbright.com
T: +1 212 408 5388

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