Business, 17.08.2021 15:50 moneyshi68

Windmill Corporation manufactures products in its plants in Iowa, Canada, Ireland, and Australia. Windmill conducts its operations in Canada through a 50 percent owned joint venture, CanCo. CanCo is treated as a corporation for U. S. and Canadian tax purposes. An unrelated Canadian investor owns the remaining 50 percent. Windmill conducts its operations in Ireland through a wholly owned subsidiary, Irish. Irish is a controlled foreign corporation for U. S. tax purposes. Windmill conducts its operations in Australia through a wholly owned hybrid entity, KiwiCo. KiwiCo is treated as a branch for U. S. tax purposes and a corporation for Australian tax purposes. Windmill also owns a 5 percent interest in a Dutch corporation, TulipS. During 2020, Windmill reported the following foreign source income from its international operations and investments. CanCo IrishCo KiwiCo TulipCo
Dividend income
Amount $45,000 $28,000 $20,000
Withholding tax 2,250 1,400 3,000
Interest income
Amount $30,000
Withholding tax 0 0
Branch income
Taxable income $93,000
AUS income taxes $31,000

Notes to the table:
1. CanCo and KiwiCo derive all of their earnings from active business operations.
2. The dividend from CanCo carries with it a deemed paid credit (§78 gross-up) of $30,000.
3. The dividend from IrishCo carries with it a deemed paid credit (§78 gross-up) of $4,000.

Required:
a. Classify the income received by Windmill and any associated §78 gross-up into the appropriate FTC baskets.
b. Windmill has $1,250,000 of U. S. source gross income. Windmill also incurred SG&A of $300,000 that is apportioned between U. S. and foreign source income based on the gross income in each basket. Assume KiwiCo’s gross income is $93,000. Compute the FTC limitation for each basket of foreign source income. The corporate tax rate is 35 percent.

Answers: 3

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Windmill Corporation manufactures products in its plants in Iowa, Canada, Ireland, and Australia. Wi...

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