International taxation (II) As Treasurer of US Exports Inc., you have set up an FSC in the Bahamas for the export to Europe of your US manufactures, and are applying arm’s length pricing of your goods “shipped” to the FSC. Your exempt foreign trade income from the sale or lease of export property is indicated below:

a Fill in the blanks above, recalling that the portion of foreign trade income exempt from taxes is 34 percent, and the Bahamas has no income tax.

b In the second case, your FSC is set up according to special administrative rules, which exempt 17/23 of foreign trade income from US taxation. Fill in the blanks below and explain your answer:

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Foreign sales corporation (arm's length pricing) Foreign trade income $100 Bahamian taxes paid US taxes Net income