Jingling Corporation is wholly owned by Jing and Ling, who are residents of Japan. Jingling is located in Nebraska and produces home furniture. Jingling sells its furniture directly to final customers in the U.S. and Japan. Jingling earns $250,000 from sales during the current year. It also receives $20,000 of royalty income from patents it owns on furniture inventions and processes. No dividends are paid during the current year.
Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.