TAX 9869 Lecture Notes - Lecture 32: Payment, Trade Finance, Withholding Tax

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17 Jul 2020
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Branch Basket - Example
•Reallocation of Gross Income to Foreign Branch
−Assume that if the disregarded payment of $100 made by USP to Foreign
Branch were an actual deduction, it would be allocated and apportioned to
USP’s general basket foreign source gross income
•USP’s general basket foreign source gross income of $100 is “reallocated
to Foreign Branch
•That $100 of general basket foreign source gross income is “attributable
to” Foreign Branch (and constitutes “foreign branch income”)
USP Gross Income (Books and Records)
General Basket
General Basket
Total
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US Source
Foreign Source
$200
$100
$300
GILTI Basket (951A)
•Section 904 defines a new separate category as “any amount includible in
gross income under section 951A (other than passive category income)”.
•Section 951A category income does not include any passive category
income under section 1.904-5(c)(6) and under 1.904-4(n)(2)Section 904(c)
•Section 904(c) carryback and carryover do not apply to the GILTI basket.
The regulations further provide that foreign tax paid or accrued with respect
to section 951A category income, including section 951A category income
that is reassigned to a separate category for income resourced under a
treaty, may not be carried back or carried forward under section 904(c).
Look-Through Rules
•The final regulations provides look-through rules with respect to interest,
rents, royalties, dividends, and inclusions under section 951(a)(1) and
951A(a)
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