1.Jorge and his wife are residents and citizens of a foreign country ("FC"). Jorge owns 100% of a corporation that is organized under the laws of FC through which he conducts his business in FC. Jorge's FC corporation has a wholly owned U.S. subsidiary through which the U.S. business is conducted. Jorge oversees both the FC and U.S. business operations. Jorge and his wife spent the following number of days in the U.S. during the calendar years indicated: Calendar Year Number of Days 2013 80 2014 90 2015 132 2016 126 Jorge and his wife spent the rest of their time in FC. They own homes in both the U.S. and FC, in which they maintain furniture and other personal belongings. They also maintain automobiles in both locations. Jorge's parents and siblings live in FC. His wife has relatives in both the U.S. and FC. They maintain bank and brokerage accounts in both the U.S. and FC. Jorge belongs to country clubs in both the U.S. and FC. Jorge and his wife vote only in FC, have FC passports and have provided Forms W-8BEN to their U.S. banks. One half of Jorge's annual compensation is paid by the FC corporation and one half is paid by the U.S. subsidiary. Jorge has always filed 1040-NR returns with the IRS in which he reports only his U.S. source income.

(a) Is Jorge a tax resident of the U.S. in 2016? Explain.

(b) Explain the significance, for U.S. tax purposes, of Jorge's U.S. tax residency status?

(c) If there were an income tax treaty (based on the U.S. Model Treaty) between FC and the U.S., would Jose's U.S. tax liability on his compensation from the U.S. subsidiary be reduced? Why or why not?

(d) If Jorge died unexpectedly, which of his assets, if any, would be included in Jorge's estate for U.S. estate tax purposes?

(e) Assuming there is no estate tax treaty between FC and the U.S., if Jorge left all of his assets outright to his wife under his Last Will & Testament, would Jorge's estate be entitled to a marital deduction for the property passing to his wife? Why or why not? If so, how is the amount determined?

2.Emily owns 100% of ABC Inc. ABC Inc. was incorporated in Delaware in 1985 and has its principal place of business in Tampa, Florida. ABC Inc. was originally operated as a C corporation, subject to the Florida corporate income tax, and made an election in 2014 to be taxed as an S corporation. ABC Inc. has retained earnings of $1,000,000 as of December 31, 2013. ABC Inc. is registered with the Florida Department of Revenue (Department) as a dealer and remits sales tax to the Department on a monthly basis. ABC Inc. is currently being audited by the Department for Sales Tax relating to a 36- month period beginning January 2011 through December 2013. ABC Inc. and the Department entered into an agreement to extend the statute of limitations through June 30, 2016. The Department issued a Notice of Intent to Make Audit Changes (NOI) that indicates that additional Sales Tax of $150,000 plus interest and penalty will be assessed. The Department has 70 days remaining on the statute of limitations as of today and is asking for an additional extension of the statute of limitations. Emily agrees with the points addressed in the Department's NOI.

1. As Emily's tax attorney, what advice should you give Emily regarding the current Sales and Use Tax Audit?

2. Would your advice change if the time remaining on the statute of limitations is 59 days instead of 70? Discuss. 3. Is ABC Inc. required to file a Florida corporate income tax return for calendar year 2014? Discuss. 4. Would your advice change if ABC Inc. sold its building in 2014 for a gain of $500,000? Discuss.

3.DP is a domestic (Florida) partnership with a foreign partner, Jose Perez, an individual who is neither a tax resident nor a citizen of the U.S. Jose resides in a country with whom the U.S. does not have an income tax treaty. In 2016, DP's income consists of (i) rental income from a commercial property it owns in Florida; (ii) dividend income from stocks it owns in U.S. corporations; (iii) dividend income from stocks it owns in foreign corporations; (iv) interest income from registered U.S. corporate bonds; (v) interest income from a U.S. bank account (unrelated to rental activities); and (vi) interest income from a foreign bank account.

(a) What, if any, are DP's tax withholding obligations with respect to Jose's distributive share of each type of DP's income?

(b) What, if any, are DP's reporting obligations with respect to its foreign bank account?

(c) What, if any, would be DP's tax withholding obligations with respect to Jose's distributive share of any gain realized by DP on the sale of its commercial rental property?

4.PharmCo will arrange for the sale of the supplement to PharmCo's established U.S. distributors (for ultimate consumption by U.S. consumers) and foreign distributors (for ultimate consumption by non-U.S. consumers). PharmCo will also cause FC Sub to ship a stock of supplement to PharmCo which PharmCo will hold and use to fill orders on FC Sub's behalf. Once FC Sub becomes self-sustaining, PharmCo will sell its proprietary compounds to the FC subsidiary at its cost. For the foreseeable future, PharmCo will cause FC Sub to retain its earnings and profits and invest them in expansions of its manufacturing capabilities.

(e) Is the proposed pricing for the sales of PharmCo's compounds to FC Sub at PharmCo's cost appropriate? Why or why not?

(f) Assuming that all documents governing sales of the supplement by FC Sub to the U.S. and foreign distributors pass the risk of loss to the distributor in FC, will any of FC Sub's income from those sales be subject to U.S. tax? Explain.

(g) Will PharmCo incur a U.S. tax liability on any of FC Sub's undistributed earnings & profits? Explain.

(h) If FC Sub has earnings and profits and makes a loan to PharmCo, what will be the tax consequences to FC Sub and/or PharmCo? Explain.

(i) Will PharmCo's U.S. tax liabilities be affected by the income taxes, if any, that FC Sub pays to FC? Explain.

(j) Assume that PharmCo liquidates FC Sub after several years of accumulating its earnings and profits. How will PharmCo's gain on such liquidation be taxed?r