Real Property Income of Foreign Persons

Real Property Income of Foreign Persons T, a nonresident alien, is a shareholder of X Corp., whose assets consist of a retailing business in Canada…

Real Property Income of Foreign Persons

T, a
nonresident alien, is a shareholder of X Corp., whose assets consist
of a retailing business in Canada and stock of Y Corp. Y’s
principal asset is an office building in Miami, but it also holds a
portfolio of stocks and bonds of Canadian corporations. How might
IRC section 897 apply to gain recognized by T on a sale of her X
Stock if, alternately:

X holds 40
percent of Y’s stock, and alternatively:

X and Y are
both domestic corporations?

X is a
domestic corporation, and Y is a foreign corporation?

X is a
foreign corporation, and Y is a domestic corporation?

X holds 60
percent of Y’s stock, and alternatively:

X and Y are
both domestic corporations?

X is a
domestic corporation, and Y is a foreign corporation?

X is a
foreign corporation, and Y is a domestic corporation?

U.S.
Tax Reform, Doing Business in the U.S. and Foreign Persons

FC
is foreign corporation organized in the Republic of Ireland and
recently listed on the Euronext Dublin Stock Exchange. FC will
organize a Delaware C corporation that will manufacture and
distribute product in the U.S. market. FC’s Vice President of Tax
recently contacted you to discuss doing business in the United
States. He/she raised several questions as follows:

As it will
take at least 1 year to build out a U.S. manufacturing facility FC
is considering having Irish based employees travel to the U.S. to
meet with current third-party distributors for business development
meetings – the VP of Tax asked whether this creates potential U.S.
tax issues for FC? Please describe;

FC would like
to fund the new U.S. operations with a combination of debt and
equity – the VP of Tax read something about U.S. interest
disallowance rules and asked whether such rules would apply to its
new U.S. operations. Please elaborate;

FC will
charge its U.S. operations for management services. The U.S.
operations will also purchase raw materials from FC that will be
used in the manufacturing process. The VP of Tax asked whether the
BEAT could apply to its U.S. operations. Please explain whether the
BEAT could apply to FC’s U.S. operations; and

On potential
interest, royalty and dividend payments from the U.S. operations to
FC, the VP of Tax asked you to describe how the U.S. withholding tax
rules should apply. Please explain the application of the U.S.
withholding tax rules as well as the potential application of the
U.S.-Ireland Income Tax Treaty.

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