TAX 9869 Lecture Notes - Lecture 26: Foreign Tax Credit
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Class 4: 06/17/20
There will be computations
Midterm exam will be similar to the homework questions
Residency starting dates
Person met SPT and became resident by obtaining GC- with both met,
residency will start the first day physically present in U.S. because you’ve
met SPT
• When you met SPT test it overrides green card
You could have a split year, you could be subject to US tax for a part of the
year and not the other
An individual could be nonrez alien, but to the extent they become a rez
alien, subject to U.S. tax
Source rules and income sourcing
How does one source income?
Important for 2 reasons:
1. NonUS persons, whether individuals or corporations are generally not
subj to US tax unless US sourced income
a. We need to know where income is sourced
2. Whether a US TP has the ability to take a foreign tax credit on the
income that is earned
. How they work, what are they
a. ***Important point- credit only against foreign sourced, not US
b. Can only take credit against foreign source income not US source
income so need to know US source income
Sourcing of expenses
GR: there are important rules in practice for alloc/apportioning expenses to
that income
FTC concepts & rules:
Diff types of foreign tax credits- why important, what we see in practice
• A lot of additional rules that have been implemented
• Important because we don’t want people to pay tax twice
• Example: I work in Japan and I’m a plumber. Work 6 months/year,
and I earn $500 of income being a plumber. Providing a service to
Japan. Come back to US other 6 months, earn another $500. Total