Questions from General Taxation

Q: Create, Inc., produces inventory in its foreign manufacturing plants for

Create, Inc., produces inventory in its foreign manufacturing plants for sale in the United States. Its foreign manufacturing assets have a tax book value of $5 million and a fair market value of $15...

Q: FoldIt, a U.S. business, paid income taxes

FoldIt, a U.S. business, paid income taxes to Mexico relative to profitable sales of shipping boxes it made in that country. Can it claim a deduction for these taxes in computing U.S. taxable income?...

Q: Mary, a U.S. citizen, is the sole

Mary, a U.S. citizen, is the sole shareholder of CanCo, a Canadian corporation. During its first year of operations, CanCo earns $14 million of foreign-source taxable income, pays $6 million of Canadi...

Q: Sarah incorporates her small business but does not transfer the machinery and

Sarah incorporates her small business but does not transfer the machinery and equipment used by the business to the corporation. Instead, the machinery and equipment are leased to the corporation for...

Q: ABC, Inc., a domestic corporation, owns 100% of

ABC, Inc., a domestic corporation, owns 100% of HighTax, a foreign corporation. HighTax has $50 million of undistributed E & P, all of which is attributable to general limitation income, and $30 milli...

Q: USCo, a domestic corporation, reports worldwide taxable income of $

USCo, a domestic corporation, reports worldwide taxable income of $500,000, including a $300,000 dividend from ForCo, a wholly owned foreign corporation. ForCo’s undistributed E & P totals...

Q: Drake, Inc., a U.S. corporation, operates

Drake, Inc., a U.S. corporation, operates a branch sales office in Turkey. During the current year, Drake earned $500,000 in taxable income from U.S. sources and $100,000 in taxable income from source...

Q: Crank, Inc., a U.S. corporation, operates

Crank, Inc., a U.S. corporation, operates a branch sales office in Ghana. During the current year, Crank earned $200,000 in taxable income from U.S. sources and $50,000 in taxable income from sources...

Q: Harold, Inc., a domestic corporation, earned $500,

Harold, Inc., a domestic corporation, earned $500,000 from foreign manufacturing activities on which it paid $150,000 of foreign income taxes. Harold’s foreign sales income is taxed at a 45% foreign t...

Q: Orion, Inc., a U.S. corporation, reports

Orion, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes for the tax year as follows. Orion’s worldwide taxable income is $600,000, and U.S. taxes before...