### Question
How does the law define passive foreign investment company?


### Answer
Under *26 U.S.C. § 1297*, **passive foreign investment company** is defined as:

> any foreign corporation if—


(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or


(2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent

#### Citation:
  - *26 U.S.C. § 1297*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter P-Capital Gains and Losses > PART VI-TREATMENT OF CERTAIN PASSIVE FOREIGN INVESTMENT COMPANIES > Subpart D-General Provisions**

