Right or Wrong

1. Resident foreign corporation and domestic corporation are taxable with Philippine income tax for their income earned both within and outside the Philippines

2. In a way, there is indirect double taxation on the income earned by either the resident citizen or domestic corporation on their income earned in the foreign country.

3. The foreign income tax paid by domestic corporation on their income earned in foreign country could be claimed in their full amount as tax credits against the Philippine income tax due for the same taxable year.

4. The following could claim as tax credit against their Philippine income tax due the foreign income tax paid for the same period, except

A. Resident Citizen

B. Resident Foreign Corporation

C. Domestic Corporation

D. None

5. The following could claim as item of deduction from their taxable income in Philippine income tax return the foreign income tax paid for the same period, except

A. Resident Citizen

B. Resident Foreign Corporation

C. Domestic Corporation

D. None

 

 

USAco, a domestic corporation, operates a branch in foreigncountry F. USAco’s sole source of income is the branch’s net profitof $200,000, and USAco pays $100,000 of creditable country F incometaxes. USAco’s pre-credit tax liability is $70,000. The maximumamount of the foreign tax credit is?

(a) $100,000.

(b) $30,000.

(c) $70,000.

(d) none of the above.

Spartan Corporation, a U.S. corporation, reported $5.4 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch. Spartania taxes branch income at 25 percent, and the United States taxes corporate income at 35 percent. (Enter your answers in dollars and not in millions of dollars.)

a. If the United States provided no mechanism for mitigating double taxation, what would be the total tax (U.S. and foreign) on the $5.4 million of branch profits?

b. Assume the United States allows U.S. corporations to exclude foreign source income from U.S. taxation. What would be the total tax on the $5.4 million of branch profits?

c. Assume the United States allows U.S. corporations to claim a deduction for foreign income taxes. What would be the total tax on the $5.4 million of branch profits?

d-1. Assume the United States allows U.S. corporations to claim a credit for foreign income taxes paid on foreign source income. What would be the total tax on the $5.4 million of branch profits?

d-2. Assume the United States allows U.S. corporations to claim a refundable credit for foreign income taxes paid on foreign source income. What would be your answer if Spartania taxed branch profits at 40 percent?

What is the total tax for a-d2?

14. What are the highest tax rates for each of the followingscenarios?

____. Operating income from a hotel earned by a foreigncorporation (excluding branch profits tax)

____. Interest income earned by a foreign corporation from a USborrower

____. Net rental income earned by an U.S. individual (excludethe passthrough deduction)

____. Capital gain earned by an U.S. individual

____. Interest income earned by a U.S. corporation

____. Capital gain earned by an U.S. corporation

____. Depreciation recapture on the sale of U.S. real estate(Section 1250 property) for an individual

____. Depreciation recapture on the sale of U.S. real estate(Section 1245 property) for an individual