From: Jeffrey Epstein <jeevacation@gmail.com>
Sent: Monday, January 14, 2013 6:56 PM
To: Erika Kellerhals
Subject: Re: IBE Structure

No it's fine , lets move forward

On Monday, January=14, 2013, Erika Kellerhals wrote:

Is the needing foreign or percentage ownership going to be an issue? C=n you avoid dc status?

Please let me know your thoughts .

Erika A.=Kellerhals

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From: Erika Kellerhals <ekellerhals@kffldaw.com>
Date: Wednesday, January 9, 2013 8:=7 AM
To: Jeffrey Epstein <jeevacation@gmail.com>
Subject: IBE Structure

As the IBE will potentially be earning passive income through its =ctivities, including interest, dividends and capital gains, the ultimate i=dividual beneficial owners/shareholders will potentially be subject to personal income tax in =he United States on this income under Subpart F. The Subpart F provision= of the Code generally limit the ability of U.S. shareholders to defer t=e recognition of certain types of foreign corporate earnings, including interest and dividends, capital gains, forei=n currency gains, rents, royalties, and certain other types of income as p=ovided by the Subpart F rules. The Subpart F rules to apply to foreign corporations and their shareholders on=y where the corporation meets the definition of a "controlled foreign co=poration" or "CFC". If a foreign corporation meets the CFC defini=ion then each "U.S. Shareholder" of the CFC must pay tax on his or her share of the CFC's Subpart F income. A =FC, as defined by Code section 957(a), is any foreign corporation of which=50 percent or more of either the total voting power of all classes of stoc= entitled to vote, or the total value of the stock, is owned by "U.S. Shareholders" on any day during the ta=able year of the foreign corporation. A foreign corporation is any enti=y organized under laws, other than those of the United States, the several=States, the District of Columbia, and, at times, Guam or other U.S. territories, but not including the USVI. T= determine whether a foreign corporation (induding a USVI corporation) is=a CFC, stock ownership tests are applied on both a voting power basis and = value basis, and certain attribution of ownership rules are applied. A "U.S. Shareholder" is a U.S. perso= that owns directly, indirectly, or constructively 10 percent of the total=voting power of the foreign corporation at any time during the tax year.=AO The definition of "U.S. persons" under Code section 957(c), includes U.S. citizens, resident aliens, domestic cor=orations, partnerships, and trusts subject to the jurisdiction of U.S. cou=ts, as well as certain corporations domiciled in certain U.S. territories,=such as Puerto Rico and Guam. Unlike the definition of a CFC however, voting power, not value, defines a U.S. s=areholder for purposes of Code section 958.

==

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