Chapter 7, Problem 5QAP

SkiCo, a Maine corporation, operates a branch in Peru selling equipment to persons planning to ski in the Andes mountain range. Peru levies an income tax on Peruvian companies equal to 25 percent of net income, with respect to foreign corporations such as SkiCo that operate in Peru, the government does not impose an income tax, but does impose a "foreign-company sales tax" equal to eight percent of the foreign corporation's Peruvian sales revenue. During the year, SkiCo's branch has sales of $200,000, expenses of $150,000 and pays a foreign-company sales tax of $16,000. If SkiCo were a Peruvian company, it would have paid Peruvian income tax of $12,500. (a) Is the foreign company sales tax creditable under §901 or §903? (b) Assume that SkiCo is required to pay both the $16,000 foreign-company sales tax and $12,500 Peruvian income tax on its branch operations. Is either type of Peruvian tax creditable under §901 or §903?

Read each case and specify which standard was violated 1.Aziza works for a multinational investment adviser based in the USA, she has US citizenship since 2020. She lives and works as a registered investment adviser in the tiny, but wealthy, island nation. The securities laws state that no investment adviser registered and working in that country can participate in initial public offerings (IPOs) for the adviser’s personal account. Aziza, believing that as an American citizen working for a U.S.-based company she should comply only with U.S. law, has ignored this Karrambian law. In addition, Aziza believes that, as a charter holder, as long as she adheres to the Code and Standards requirement that she disclose her participation in any IPO to her employer and clients when such ownership creates a conflict of interest, she is meeting the highest ethical requirements.

Spartan Corporation, a U.S. corporation, reported $6.2 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch. Spartania taxes branch income at 15 percent, and the United States taxes corporate income at 21 percent. Required: a. If the United States provided no mechanism for mitigating double taxation, what would be the total tax (U.S. and foreign) on the $6.2 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 $6.2 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 $6.2 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 $6.2 million of branch profits? d-2. Assume the…