Questions from Taxation

Q: Jumper Inc., which has a 21 percent tax rate, owns

Jumper Inc., which has a 21 percent tax rate, owns 40 percent of the stock of a CFC. At the beginning of 2018, Jumper’s basis in its stock was $660,000. The CFC’s 2018 income was $1 million, $800,000...

Q: Yasmin Corporation, a calendar year domestic corporation, owns 100 percent

Yasmin Corporation, a calendar year domestic corporation, owns 100 percent of Luna Inc., a calendar year controlled foreign corporation. Luna has never paid a dividend and at the end of 2017 has accum...

Q: Grandmere, a calendar year domestic corporation, owns 50 percent of

Grandmere, a calendar year domestic corporation, owns 50 percent of Petit, Inc., a calendar year controlled foreign corporation. At the end of 2017, Petit has accumulated $26 million of undistributed...

Q: Fairview, Inc. is a CFC with total foreign earnings of

Fairview, Inc. is a CFC with total foreign earnings of $30 million, of which $8 million is considered subpart F income. Fairview owns tangible business property with an adjusted tax basis of $40 milli...

Q: Leming, Inc. is a CFC with total foreign earnings of

Leming, Inc. is a CFC with total foreign earnings of $90 million, of which $27 million is considered subpart F income. Leming owns tangible business property with an adjusted tax basis of $70 million....

Q: Norton Inc. is a domestic corporation with several foreign subsidiaries.

Norton Inc. is a domestic corporation with several foreign subsidiaries. This year, Norton has $940 million domestic gross receipts and $800 million of allowable deductions. It made deductible related...

Q: Alamo, a Texas corporation, manufactures plastic components that it sells

Alamo, a Texas corporation, manufactures plastic components that it sells to Vegas, a Mexican corporation, for assembly into a variety of finished goods. Alamo owns 60 percent of Vegas’s stock. Alamo’...

Q: Please Cotton Comfort Corporation is a U.S. shirt manufacturer

Please Cotton Comfort Corporation is a U.S. shirt manufacturer with a foreign subsidiary in Country X. Cloth to make shirts is woven in the United States, at a cost of $14 per shirt and shipped to Cou...

Q: What is the effect on the NPV of the restructured transaction in

What is the effect on the NPV of the restructured transaction in the preceding problem if Firm H’s marginal tax rate in year 2 increases to 30 percent?

Q: Refer to the facts in the preceding problem. Assume that the

Refer to the facts in the preceding problem. Assume that the tax rate in Country X is 15 percent and Cotton Comfort’s U.S. marginal tax rate is 21 percent. The corporation and its subsidiary have agre...