Excess distribution rules refer to the regulations that govern how distributions from a controlled foreign corporation (CFC) to its U.S. shareholders are taxed, particularly when those distributions exceed the accumulated earnings and profits of the CFC. These rules are crucial for determining the tax implications of distributions to U.S. shareholders, as they prevent tax avoidance by ensuring that certain excess distributions are treated as ordinary income rather than as capital gains, thus affecting the overall tax burden on U.S. taxpayers.
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