Code §245A of effectively exempts U.S. corporation from U.S. Federal income tax on dividends received from certain foreign subsidiaries. It allows a deduction equal to the amount of the dividend received. Code §245A applies only with respect to dividends received “by a domestic corporation which is a United States shareholder.” Nevertheless, Code §245A can also apply to dividends received by a controlled foreign corporation from a qualifying participation in a lower-tier foreign corporation. The question presented in that fact pattern relates to how Code §245A will be applied. Is the controlled foreign corporation entitled to claim the deduction as dividends are received? Or is a U.S. corporation that is a U.S. Shareholder with regard to the foreign corporation entitled to claim the deduction at the time Subpart F income is reported in its U.S. tax return? Significantly different results may apply depending on the answer. Interestingly, the differences affect U.S. taxpayers other than the corporation that is a U.S. Shareholder. Stanley C. Ruchelman and Daniela Shani explain the different results that may apply.