Publico, a Canadian public corporation, invested $1 million in its wholly-owned US affiliate which is an LLC under the American corporate law. What is the fiscal treatment of a repatriation of the initial subscription? The Department stated (TaxInterpretations translation):
In a given situation, whether an amount is paid as a reimbursement of an initial subscription in a LLC is a question of fact. However, in a case where an amount paid to Publico by the LLC could be considered a reimbursement of its initial subscription under its relevant constituting documents, the amount paid would be considered a reduction in the paid-up capital rather than a dividend for purposes of the Act.