What it is. "DRE" is practitioner shorthand for a disregarded entity. A single-member US LLC is disregarded by default, and many foreign entities can elect to be disregarded on Form 8832 (the check-the-box election), although some foreign company types are always corporations. The IRS forms call a foreign one an FDE (foreign disregarded entity), and its owner for tax purposes its tax owner.
Why it matters. Ignored for income tax doesn't mean ignored for reporting. A US owner of an FDE files Form 8858 for it. If a CFC or a foreign partnership owns the FDE, its figures go into that entity's 5471 or 8865, and the US filers also file an 8858. And an entity with one owner can't be a partnership, so a single-owner foreign vehicle is an 8858 question, not an 8865 one.
Worked example
A US company sets up a Luxembourg S.à r.l. and checks the box to disregard it. The S.à r.l.'s income goes straight onto the US company's own return, and the company attaches a Form 8858 for it every year.
Where you'll see it: Structuring cross-border holding companies, check-the-box elections, and working out whether a vehicle needs an 8858, 8865 or 5471.
Full explainer: check-the-box elections and Form 8832 →
Full explainer: Form 8858 and foreign disregarded entities →
Full explainer: Section 987 currency gain or loss on foreign branches and DREs →
See all 53 terms in the glossary
This glossary is general information, simplified for learning. It is not tax, legal or investment advice, and real structures turn on facts and documents not shown here.