YEAR 2017

USAco, a domestic corporation, manufactures and sells widgets in the US and worldwide through its two wholly-owned foreign subsidiaries, FORco-A (a Country A subsidiary) and FORco-B (a Country B subsidiary). During year 2018, FORco-A had $10 million of sales income to Country A customers, paid $1 million in foreign income taxes and distributed no dividends. FORco-B had $20 million of sales income to Country B customers, paid $3 million in foreign income taxes and distributed no dividends.

During the current year, USAco had $20 million of income from their domestic manufacturing and sales. Assume FORco-A had all of their undistributed foreign earning in cash equivalents and FORco-B had all of their undistributed earning invested in equipment.

Compute USAco's residual US tax liability. Assume US tax rate is 35% and that USAco's does not elect any deffered payment of taxes.

Directions: Fill in USAco's Tax Return (YEAR 2017)

US Sourced Income............................... _________ million

FORco-A Dividend.................................__________million

FORco-A Section 78..............................__________million

FORco-B Dividend...............................___________million

FORco-B Section 78............................___________million

Net Section 965 inclusion (15% cash)....._________million

Total......................................................______________

US Taxable Income.............................____________million

US Tax Rate.........................................____x35%_____

Total......................................................._______________

Pre-credit US Tax................................_____________million

Foreign Tax Credits............................._____________million

Total....................................................._______________

Residual US Tax................................._______________million

YEAR 2018

During Year 2018, FORco-A had $10 million in sales of income to Country A customers, paid $1 million in foreign income taxes and distribuetd an $18 million dividend. FORco-B had $20 million of sales income to Country B customers, paid $3 million in foreign income taxes and distributed $34 million in dividends.

During the current year, USAco had $20 million of income from their domestic manufacturing and sales and received a $6 milion dividend from FORco-B. Compute USAco's residual US tax liability. Assume the US tax rate is 21% (and FORco's US tax basis in its assets exceed GILTI limits)

Directions: Fill in USAco's Tax Return (YEAR 2018)

US Sourced Income............................... _________ million

FORco-A Dividend.................................__________million

FORco-A Section 78..............................__________million

FORco-B Dividend...............................___________million

FORco-B Section 78............................___________million

Net Section 965 inclusion (15% cash)....._________million

Total......................................................______________

US Taxable Income.............................____________million

US Tax Rate.........................................____x35%_____

Total......................................................._______________

Pre-credit US Tax................................_____________million

Foreign Tax Credits............................._____________million

Total....................................................._______________

Residual US Tax................................._______________million