DEFINITION of 'Look Thru'

A complex provision defined in section 954(c)(6) of the U.S. Internal Revenue Code that lowered taxes for many U.S. multinational companies. The look thru rule gave qualifying U.S. multinationals a lower global effective tax rate by providing a special accounting method for calculating taxes owed on income from controlled foreign corporations. The rule was originally effective from Jan. 1, 2006 through Dec. 31, 2009, but the 2010 Tax Relief Act extended the rule through Dec. 31, 2011.

BREAKING DOWN 'Look Thru'

The look thru rule allowed companies to exclude certain dividends, interest, rents and royalties attributable to a controlled foreign corporation from Subpart F income. A controlled foreign corporation is owned by U.S. citizens but does business in a different country. Owners might want their company to operate abroad if it is less expensive and/or if there is an overseas market for the company's service or product.

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