Question
CLA Limited, a U.S. based company and taxpayer, has investments in Foreign Entities A-G. Relevant information for these entities for the current fiscal year appears
CLA Limited, a U.S. based company and taxpayer, has investments in Foreign Entities A-G. Relevant information for these entities for the current fiscal year appears in the following table:
Entity | Country | Percent Owned | Activity | Income before Tax ($ millions) | Income Tax Rate | Dividend Withholding Tax Rate | Net Amount Received by Parent ($ millions) |
CLA | USA | - | Manufacturing | $ 10.00 | 35% | - | - |
A | Argentina | 100% | Manufacturing | $ 1.00 | 35% | 0% | $ 0.20 |
B | Brazil | 100% | Manufacturing | $ 2.00 | 34% | 0% | $ 2.50 |
C | Canada | 100% | Manufacturing | $ 3.00 | 26% | 5% | $ 1.00 |
D | Hong Kong | 100% | Investment | $ 2.00 | 16.5% | 0% | $ 1.50 |
E | Liechtenstein | 100% | Distribution | $ 3.00 | 10% | 4% | $ - |
F | Japan | 51% | Manufacturing | $ 2.00 | 38% | 5% | $ 0.50 |
G | New Zealand | 60% | Banking | $ 4.00 | 28% | 5% | $ 1.00 |
Additional Information
- CLA Limited has $10 million income before tax is derived from the production and sale of products in the United States.
- Each entity is legally incorporated in its host country other than Entity A, which is registered with the Argentinian government as a branch.
- Entities A, B, C, and F produce and market products in their home countries.
- Entity D makes passive investments in stocks and bonds in the Hong Kong financial markets. Income is derived solely from dividends and interest.
- Entity E markets good purchased from (manufactured by) CLA Limited. Of Es sales, made in Liechtenstein.
- Entity G operates in the chemical industry in New Zealand.
Required:
Determine the following:
- The amount of U.S. taxable income for each Entity A-G.
- The foreign tax credit allowed in the United Sates, first by basket and then in total.
- The net U.S. tax liability.
- Any excess foreign tax credits (identify by basket).
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