pass-through entity
(B) Pass-through entity. The term pass-through entity means a partnership, a disregarded entity, or any other person (whether domestic or foreign) other than a corporation to the extent that income, gain, deduction or loss of the person is taken into account in determining the income or loss of a controlled foreign corporation that owns, directly or indirectly, interests in the person. (C) Transparent interest. The term transparent interest means an interest in a pass-through entity (or the activities of a branch) that is not a tested unit. (8) Examples(i) Scope. This paragraph (c)(8) provides examples illustrating the application of the rules in paragraph (c)(7) of this section. (ii) Presumed facts. For purposes of the examples in paragraph (c)(8)(iii) of this section, except as otherwise stated, the following facts are presumed: (A) USP is a domestic corporation. (B) CFC1X and CFC2X are controlled foreign corporations organized in, and tax residents of, Country X. (C) CFC3Z is a controlled foreign corporation organized in, and tax resident of, Country Z. (D) FDEX is a disregarded entity that is a tax resident of Country X. (E) FDE1Y and FDE2Y are disregarded entities that are tax residents of Country Y. (F) FPSY is an entity that is organized in, and a tax resident of, Country Y but is classified as a partnership for federal income tax purposes. (G) CFC1X, CFC2X, CFC3Z, and the interests in FDEX, FDE1Y, FDE2Y, and FPSY are tested units (the CFC1X tested unit, CFC2X tested unit, CFC3Z tested unit, FDEX tested unit, FDE1Y tested unit, FDE2Y tested unit, and FPSY tested unit, respectively). (H) CFC1X, CFC2X, CFC3Z, FDEX, FDE1Y, and FDE2Y conduct activities in the foreign country in which they are tax resident, and properly reflect items of income, gain, deduction, and loss on separate sets of books and records. (I) All entities have calendar taxable years (for both federal income tax purposes and for purposes of the relevant foreign country) and use the Euro () as their functional currency. At all relevant times 1 = $1. (J) The maximum rate of tax specified in section 11 for the CFC inclusion year is 21 percent. (K) Neither CFC1X, CFC2X, nor CFC3Z directly or indirectly earns income described in section 952(b), has any items of income, gain, deduction, or loss, or makes or receives disregarded payments. In addition, no tested unit of CFC1X, CFC2X, or CFC3Z makes or receives disregarded payments. (L) An election made under section 954(b)(4) and paragraph (c)(7)(viii) of this section is effective with respect to CFC1X and CFC2X, as applicable, for the CFC inclusion year. (M) The same amounts of regarded items of income and deduction that are accrued under federal income tax law are also accrued under foreign law. (iii) Examples(A) Example 1: Effect of disregarded interest(1) Facts(i) Ownership. USP owns all of the stock of CFC1X, and CFC1X owns all of the interests of FDE1Y.