IRS CCA: Dividends Received by a CFC from a Specified 10% Owned Foreign Corporation May Not Receive Dividends Received Deduction Treatment (IRC §245A)

A foreign corporation is not allowed a dividends received deduction under I.R.C. §245A(a) when receiving a dividend from another foreign corporation, the Chief Counsel’s Office advised. D is a domestic corporation, and FC1 and FC2 are foreign corporations. D wholly owns FC1, which is a CFC (within the meaning of §957(a)). FC1 owns 45% of the single class of stock of FC2, and the remaining stock of FC2 is owned by a nonresident alien individual. FC2 is not a CFC but is a specified 10-percent owned foreign corporation (SFC) (within the meaning of §245A(b)). FC1 receives a dividend from FC2. ...