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Molly, Inc. a domestic corporation, owns 15% of PJ. and 12% of Emma, Inc., both foreign corporations. Molly is paid gross dividends of $35,000 and...
11. Molly, Inc. a domestic corporation, owns 15% of PJ. Inc. and 12% of Emma, Inc., both foreign corporations. Molly is paid gross dividends of $35,000 and $18,000 from PJ and Emma, respectively. PJ withheld and paid more than $10,500 in foreign taxes on the $35,000 dividend. PJ's country of residence levies a 20% tax on dividends paid to nonresident corporations. However, the tax rate is increased to 30% if the recipient is a resident of a country that provides a FTC. Taxes of $3,600 were withheld on the dividend from Emma. What tax issues must be considered in determining the availability and amount of the FTC allowed to Molly, Inc.?14. Old Gear, Inc. a foreign corporation, sell vacuum tubes in several countries including the U.S. In fact, currently 18% of Old Gear's sales income is sourced in the U.S. (through branches in N.Y. and Miami). Old Gear is considering opening additional branches in San Francisco and Houston in order to increase U.S. sales. What tax issues must Old Gear consider before making this move?21. Weight, Inc. a domestic corporation, purchases weight-lifting equipment for resale from HiDisu, a Japanese corporation, for 75 million yen. On the date of purchase, 150 yen is equal to $1 U.S. (Y150:$1). The purchase is made on December 15, 2008, with payment due in 60 days. Weight is a calendar year taxpayer. On December 31, 2008, the foreign exchange is Y140:$1. What amount of foreign currency gain or loss, if any, must Weight recognize for 2008 as a result of this transaction?30. Rubarb, Inc, a U.S. corporation, earned $500,000 in total taxable income including $80,000 in foreign-source taxable income from its German branch’s manufacturing operations and $30,000 in foreign-source taxable income form its Swiss branch’s engineering services operations. Rubarb paid $32,000 in German income taxes and $1,500 in Swiss income taxes. Compute Rubarb’s U.S. tax liability after an available foreign tax credits. Assume the U.S. tax rate is 34%.
