Assignment 1: Unit 6 Problems

1. For purposes of computing a corporations state taxable income, do states generally, permit a United States parent corporation to claim a dividends-received deduction for dividends received from a foreign country subsidiary?
2. USAco, a domestic corporation, wholly owns a foreign subsidiary in Hong Kong called HKco. USAco sells HKco the seven components necessary to make sunglasses. Following one page of directions written in Chinese, HKco employees put the components together to make the sunglasses for HKcos sale throughout Europe. In order to determine whether USAco has any foreign base company sales income under Subpart F, the IRS needs to analyze whether HKcos activities constitute manufacturing.What procedures can the IRS employ to gather the information needed to make this determination?
3. USAco is the wholly-owned United States subsidiary of ASIAco, a foreign corporation. USAco purchases automobiles from ASIAco for $20,000, and resells the automobiles for $21,000. The IRS conducts a transfer pricing examination of USAco and proposes an adjustment based on what it believes to be the arms length transfer price of $15,000. USAco decides to pursue the issue at both Appeals and Competent Authority under the Simultaneous Appeals Procedure (SAP). Describe the SAP procedures.