International Taxation

by Doernberg, Richard L.

• ISBN13: 9780314212023
• ISBN10: 0314212027
• Edition: 3rd
• Format: Paperback
• Copyright: 1997-01-01
• Publisher: West Pub Co

Summary

Basic U.S. Jurisdictional Tax Principles: U.S. Activities of Foreign Taxpayers; Taxing Rules; Source Rules; Role of Income Tax Treaties; Introduction to U.S. Business Activity in Foreign Countries; Foreign Tax Credit; Intercompany Pricing; Controlled Foreign Corporations and Related Provision; Foreign Currency; International Tax-Free Transaction; Special Incentives and Disincentives; Foreign Sales Corporations; International Boycott and Foreign Bribery Provision; United States Transfer Tax Provisions: Estate and Gift Taxation for Resident and Nonresident Aliens.

Table of Contents

PREFACE	V	(16)
TABLE OF CASES	XXI	(4)
TABLE OF INTERNAL REVENUE CODE SECTIONS	XXV	(15)
TABLE OF TREASURY REGULATIONS AND REVENUE RULINGS	XLIX
PART 1. OVERVIEW OF FUNDAMENTAL CONCEPTS	1	(26)
Chapter 1. Introduction	1	(10)
1.01 Growth of International Trade	1	(1)
1.02 Economics of International Trade	1	(1)
1.03 The Central Problem of International Taxation	2	(1)
1.04 Economics of Juridical Double Taxation	3	(3)
1.05 Overview of Worldwide International Tax Systems	6	(5)
Chapter 2. Basic U.s. Juridictional Tax Principles	11	(16)
2.01 Introduction to U.S. Taxing Provisions	11	(1)
2.02 Outbound Transactions	11	(2)
2.03 Inbound Transactions	13	(5)
(a) Individuals	13	(3)
(b) Corporations	16	(1)
(c) Partnerships	17	(1)
2.04 Citizenship and Residency	18	(5)
(a) Individuals	18	(3)
(b) Corporations	21	(2)
2.05 Expatriates	23	(2)
2.06 Introduction to U.S. Income Tax Treaties	25	(2)
PART II. U.S. ACTIVITIES OF FOREIGN TAXPAYERS	27	(305)
Chapter 3. Taxing Rules	27	(47)
3.01 Overview	27	(1)
3.02 "Engaged in a Trade or Business" in the United States	28	(4)
3.03 "Effectively Connected" Income	32	(6)
(a) U.S. Source Income	32	(1)
(b) Foreign Source Income	33	(3)
(c) Income Effectively Connected to a Pre-existing Trade or Business	36	(1)
(d) Effectively Connected Income Election	37	(1)
3.04 Nonbusiness Income From U.S. Sources	38	(10)
(a) Interest	39	(6)
(1) Original Issue Discount	39	(1)
(2) Portfolio Interest	40	(4)
(3) Bank Deposists	44	(1)
(b) Dividends	45	(1)
(c) Rents	46	(1)
(d) Income From Services	46	(1)
(e) Social Security Benefits	47	(1)
(f) Other FDAP Income	47	(1)
(g) Capital Gains	48	(1)
3.05 The Brranch Profits Tax	48	(6)
(a) The Branch Profits Tax on Branch Earnings	48	(4)
(b) The Branch Profits Tax on Interest	52	(1)
(c) The Branch Profits Tax and Secondary Witholding on Dividends	53	(1)
3.06 Foriegn Investment in U.S. Real Property	54	(6)
(a) Operational Income	54	(2)
(b) Dispositional Income	56	(1)
3.07 Transportation Income	60	(1)
3.08 Taxation of Foreign Governments	61	(2)
3.09 Filing, Witholding, and Reporting Requirements	63	(11)
(a) Filing Requirements	63	(2)
(b) Sailing Permits	65	(1)
(c) The Need for Witholding	65	(1)
(d) Witholding on Dividends, Interest, and Other Periodic Payments	66	(4)
(e) FIRPTA Witholding	70	(2)
(f) Witholding for Paartnerships	72	(1)
(g) Information Reporting	73	(1)
(c) Soak-up Taxes	158	(1)
(d) Specific Economic Benefit	158	(3)
(e) Taxes in Lieu of an Income Tax	161	(1)
7.04 Computing the Direct Credit	162	(1)
7.05 Computing the Indirect Credit	163	(8)
(a) Overview	163	(1)
(b) Minimum Ownership Requirements	164	(2)
(c) Amount of Tax Deemed Paid	166	(5)
7.06 Limitations on the foreign Tax Credit	171	(23)
(a) Overview	171	(4)
(b) Separate "Baskets"	175	(13)
(1) Passive Income Basket	178	(2)
(2) High Withholding Tax Interest Basket	180	(3)
(3) Noncontrolled Section 902 Dividend Basket	183	(3)
(4) Look-Through Rules	186	(2)
(c) Treatment of Foreign Losses	188	(3)
(d) Treatment of U.S. Losses	191	(1)
(e) Tax Credit Source Rules	192	(2)
7.07 Effect of Treaties on the Foreign Tax Credit	194	(2)
Chapter 8. Intercompany Pricing	196	(53)
8.01 Overview	196	(3)
8.02 Application of I.R.C. 482 in General	199	(4)
8.03 Application of I.R.C. 482 to Specific Transactions	203	(24)
(a) Sales	204	(10)
(1) Comparable Uncontrolled Price Method	206	(3)
(2) Resale Price Method	209	(1)
(3) Cost Plus Method	210	(1)
(4) Comparable Profits Method	211	(1)
(5) Profit Split Method	211	(1)
(6) Other Methods	211	(3)
(b) Services	214	(2)
(c) Rentals of Tangible Property	216	(1)
(d) Licenses of Intangible Property	216	(10)
(1) The Comparable Uncontrolled Transaction Method	217	(2)
(2) Comparable Profit Method	219	(2)
(3) Profit Split Method	219	(1)
(4) Other Methods	219	(1)
(5) Periodic Adjustments	219	(2)
(6) Identification of the Developer	221	(1)
(7) Cost Sharing Agreements	222	(3)
(8) "Round Trip" Transactions	225	(1)
(e) Loans	226	(1)
8.04 Comparable Profits Method	227	(4)
(a) Methodology	227	(1)
(b) Examples	228	(3)
8.05 Profit Split	231	(4)
8.06 The Interplay of I.R.C. 482 and Foreign Law	235	(3)
8.07 Other I.R.C. 482 Adjustments	238	(2)
8.08 Accuracy-Related Penalty	240	(1)
8.09 I.R.C. 482 and the Foreign Tax Credit	241	(1)
8.10 I.R.C. 482 and U.S. Income Tax Treaties	242	(1)
8.11 Advance Pricing Agreements	243	(2)
8.12 Reporting Requirements for Related Taxpayers	245	(4)
Chapter 9. Controlled Foreign Corporations and Related Provisions	249	(36)
9.01 Overview	249	(1)
9.02 Definitions: Controlled Foreign Corporation and United States Shareholder	250	(3)
9.03 Income Taxable to Shareholders	253	(18)
(a) Subpart F Income	254	(14)
(1) Foreign Personal Holding Company Income	255	(3)
(2) Foreign Base Company Sales Income	258	(5)
(3) Foreign Base Company Services Income	263	(2)
(4) Other Foreign Base Company Income	265	(1)
(5) Allocation of Deductions	265	(1)
(6) Relief Provisions	266	(1)
(7) Insurance Income	267	(1)
(b) Increase in Earnings Invested in U.S. Property	268	(3)
9.04 Adjustments to Stock Basis	271	(1)
9.05 Foreign Tax Credit	272	(2)
9.06 Related Provisions	274	(11)
(a) Gains From the Sale of Certain Stock	275	(2)
(b) Accumulated Earnings Tax Provisions	277	(1)
(c) Personal Holding Company Tax Provisions	278	(1)
(d) Passive Foreign Investment Company Provisions	279	(3)
(e) Passive Foreign Corporations	282	(3)
Chapter 10. Foreign Currency	285	(24)
10.01 Overview	285	(5)
10.02 Functional Currency	290	(3)
10.03 Foreign Currency Transactions	293	(10)
(a) Acquisition and Disposition of Foreign Currency	294	(1)
(b) Lending and Borrowing Foreign Currency	295	(2)
(c) Acquisition and Disposition of Assets Denominated in Foreign Currency	297	(1)
(d) Accounts Receivable and Payable	298	(2)
(e) Foreward, Futures and Option Contracts	300	(1)
(f) Hedging	301	(2)
10.04 Foreign Currency Translation	303	(4)
(a) Foreign Branches	303	(3)
(b) Foreign Corporations	306	(1)
10.05 Treatment of Individuals	307	(2)
Chapter 11. International Tax-Free Transactions	309	(23)
11.01 Overview	309	(4)
11.02 Outbound Transactions	313	(12)
(a) General Rule	313	(1)
(b) The Active Trade or Business Exception	314	(3)
(c) The Stock or Securities Exception	317	(2)
(d) Treatment of Liquidating Corporation	319	(1)
(e) Intangible Assets	319	(4)
(f) Branch Loss Recapture Rule	323	(1)
(g) Contributions to Capital and Transfers to Estates, Trusts and Pertnerships	324	(1)
11.03 Non-Outbound Transactions	325	(7)
PART IV. SPECIAL INCENTIVES AND DISINCENTIVES	332	(31)
Chapter 12. Foreign Sales Corporations	332	(17)
12.01 Overview	332	(2)
12.02 FSC Qualification	334	(2)
12.03 Foreign Presence	336	(4)
(a) Export-Related Income	336	(1)
(b) Foreign Management	337	(1)
(c) Foreign Economic Processes	338	(2)
12.04 Taxation of FSC	340	(6)
12.05 Special Rules for Small Corporations	346	(3)
Chapter 13. International Boycott and Foreign Bribery Provisions	349	(14)
13.01 Overview of International Boycott Provisions	349	(2)
13.02 Boycott Participation	351	(2)
13.03 Examples of Penalized Conduct	353	(3)
(a) Discriminatory Refusals to do Business	353	(2)
(b) Discriminatory Hiring Practices	355	(1)
(c) Discriminatory Shipping and Insurance Arrangements	355	(1)
13.04 Tax Effect of Boycott Participation	356	(4)
13.05 Foreign Bribery Provisions	360	(3)
PART V. UNITED STATES TRANSFER TAX PROVISIONS	363	(20)
Chapter 14. Estate and Gift Taxation for Resident and Nonresident Aliens	363	(20)
14.01 The U.S. Estate Tax	363	(11)
(a) Residency for Estate, Gift and Generation-Skipping Tax Purposes	364	(3)
(b) Gross Estate	367	(3)
(1) U.S. Real Property	367	(1)
(2) Tangible Personal Property	367	(1)
(3) Intangible Personal Property	368	(2)
(i) Shares of Stocks in a Corporation	368	(1)
(ii) Interests in a Partnership and Trust	368	(1)
(iii) Debt Obligations	369	(1)
(iv) Insurance Policies, Annuties and Choses in Action	369	(1)
(4) Certain Lifetime Transfers	370	(1)
(c) Deductions Used to Determine Taxable Estate	370	(2)
(d) Computation of Estate Tax	372	(1)
(e) Credits Subtracted to Determine Tax Due	373	(1)
14.02 The U.S. Gift Tax	374	(3)
(a) Taxable Transfers	374	(1)
(b) Exclusions From Gift Tax	375	(1)
(c) Computation of Gift Tax	376	(1)
14.03 The U.S. Generation-Skipping Transfer Tax	377	(2)
(a) Generation-Skipping Transfers	377	(1)
(b) Exemptions and Deductions	378	(1)
(c) Computation of Generation-Skipping Tax	379	(1)
(d) Credits Subtracted to Determine Tax Due	379	(1)
14.04 U.S. Estate, Gift, and Generation-Skipping Transfer tax Treaties	379	(4)
INDEX	383
Chapter 4. Source Rules	74	(31)
4.01 The Income Source Rules	74	(18)
(a) Interest	75	(2)
(1) Domestic Payor	75	(1)
(2) Foreign Payor	76	(1)
(b) Dividends	77	(1)
(1) Domestic Payor	77	(1)
(2) Foreign Payor	77	(1)
(c) Personal Services	78	(3)
(d) Rentals and Royalties	81	(1)
(e) Real Property	82	(1)
(f) Personal Property	82	(7)
(1) Purchased Inventory	82	(2)
(2) Produced Personal Property	84	(2)
(3) Intangible Property	86	(1)
(4) Depreciable Personal Property	87	(1)
(5) Other Personal Property	88	(1)
(6) Sales Through Offices or Fixed Places of Businesses in the United States	89	(1)
(g) Other gross income	89	(2)
(h) Residence for Source Rule Purposes	91	(1)
4.02 Deduction Allocation Rules	92	(13)
(a) In General	92	(5)
(b) Interest	97	(4)
(c) Research and Experimental Expenditures	101	(4)
Chapter 5. The Role of Income Tax Treaties	105	(33)
5.01 The Bilateral Income Tax Treaty Network	105	(2)
5.02 The Treaty-Making Process in the United States	107	(1)
5.03 The Relationship of Income Tax Treaties and the Code	107	(2)
5.04 Development of Model Income Tax Treaties	109	(2)
5.05 Income Tax Treaty Provisions	111	(25)
(a) Interpretation of U.S. Income Tax Treaties	111	(1)
(b) Scope of the Treaty	112	(2)
(c) Definitions	114	(1)
(d) Classification and Assignment Rules	115	(11)
(1) Business Income	115	(6)
(2) Personal Services Income	121	(2)
(3) Investment Income	123	(3)
(4) Other Income	126	(1)
(e) Avoidance of Double Taxation	126	(1)
(f) Limitation on Benefits	127	(3)
(g) Nondiscrimination	130	(2)
(h) Mutual Agreement Procedure	132	(2)
(i) Exchange of Information and Administrative Assistance	134	(2)
5.06 Tax Sparing	136	(2)
Chapter 6. Introduction to U.s. Business Activity in Foreign Countries	138	(7)
6.01 Introduction	138	(2)
6.02 Citizens and Residents of the United States Living Abroad	140	(5)
(a) Introduction	140	(1)
(b) Foreign Income Exclusion	141	(2)
(c) Housing Cost Amount	143	(2)
Chapter 7. The Foreign Tax Credit	145	(51)
7.01 Overview	145	(7)
(a) Relieving Double Taxation	145	(5)
(b) The Statutory Framework	150	(2)
7.02 Eligibility	152	(1)
7.03 Creditable Taxes	153	(9)
(a) Definition of an Income Tax	153	(4)
(b) Rebated Taxes and Subsidies	157	(1)