TAX 9869 Lecture Notes - Lecture 35: Payment, Foreign Corporation
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Sec 78 Gross Up:
• Says that if im going to use taxes as a credit ^^ $200
• Must also include that amount in income
• S78 Gross up subpart F income for the taxes that im going to use as
credit
• Apply formula and you're allowed $200 of credit, must gross up
subpart F income for $200 as well
• EX: 1000 of subpart F + $200 of taxes paid + 5000 total earned
• What is the total income that the US corporation SH has for the
year?
• Sub F of 1000
• Sec 78 of 200
• Income for year = 1200
• So its not just 1000 its 1200!
• Must gross up for amt of taxes that you paid
• How much tax would they have to pay 1200*21%=252 but get credit
for 200 so pay $52 for IRS
• Subpart f = FSI (general type of biz income)
• Gross up = FSI
• So 1200 is in the general basket!
PART 1:
Non-U.S. persons, either, indiv/corp doing biz in US
Taxability: can US tax non-US person on income?
Review:
• Residency- nonresident alien can become resident of US for tax
purposes if:
1. meets green card test or
2. SPT
• Income sourcing
• FTC
When you have non-US person who has activity in US, US could have right
to tax income
• If you’re non-US person (foreign person (nonrez alien/individual))
foreign corp organized outside US, shouldn’t be subject to taxation on
income, unless you have some connection to US
• Once you have connection to US, US has right to tax your income