U.S. Tax on American-owned Businesses’ Foreign Profits Is Constitutional

That’s what the U.S. Supreme Court said in a 7-2 decision. Congress has the power to tax citizens on their share of undistributed income from a corporation operating abroad. It’s up to Congress to choose whether to tax the business or its owners. The case involved a couple who owned a minority interest in a corporation in India that generated income which was never distributed to them. They argued they shouldn’t be taxed because the income was “unrealized,” but the majority of the court disagreed. Because the entity hadn’t been taxed on its profits, the owners could under what’s called a transition tax. #IdeaoftheDay