TAX 9869 Lecture Notes - Lecture 35: Payment, Foreign Corporation

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17 Jul 2020
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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!
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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
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