ACC$337-$ Roosevelt University

Chapter $8$ Homework $-$ Exercise $3$

Hitech Corporation is a U$.$S$.$ based taxpayer that provides logistics services to companies

in the food products industry. Hitech is wholly owned by a company headquartered in Japan.

Hitech;s U$.$S$.$ taxable income for the current year is as follows:

In U$.$S$.$ $

Revenues $650,000,000$

Expenses:

Salaries $425,000,000$

Royalties $85,000,000$

Interest $50,000,000$

Taxable income $90,000,000$

Salaries are paid to U$.$S$.$ employees in $75$ locations around the country.

Royalties and interest are paid by Hitech to its parent company in Japan.

Hitech has generated more than $$500$ million in revenues in each of its $5$ years of operations.

Determine if Hitech meets the conditions to be potentially liable for Base Erosion Anti$-$Abuse Tax $($BEAT$).$

Calculate the U$.$S$.$ tax liability.

Taxable income

Income tax rate $21\%$

U$.$S$.$ tax liability

Calculate the specified return on modified taxable income.

Revenues

Expenses Salaries only

Modified taxable income

Specified return rate $10\%$

Specified return tax

Base erosion anto$-$abuse tax $($BEAT$)$