SOLVED

81) Music Corporation is a CFC incorporated in Country M. Music receives interest and dividends from its two foreign subsidiary corporations, Sharp Corporation and Flat Corporation. Sharp is incorporated in Country S and conducts all of its activities in that country. Flat is incorporated in Country M and conducts all of its activities in that country. Are the interest and dividends received by Music Corporation FPHCI? 82) Zeta Corporation, incorporated in Country Z, is 100% owned by Zelda Corporation, a U. S. corporation. Zelda purchases some machines from an unrelated corporation, for use in Country A. The portion of the sales contract covering installation and maintenance of the machines is assigned by Zelda to Zeta. Zeta is to be paid for these services by Zelda. Does this qualify as foreign base company services income? 83) Domestic corporation B owns 200 of the 400 outstanding shares of foreign corporation K’s stock. U.S. citizen R owns the remaining K stock. The domestic corporation held the stock for 40 days two years ago, 365 days last year, and 80 days this year. None of K’s income is Subpart F income. The foreign corporation has E&P of $50,000 for each of the three years in question. None of the years is a leap year. On the 80th day of the current year, the stock is sold by B to R in a transaction in which a $100,000 gain is recognized by B. What part of B’s gain is capital gain? 84) A foreign corporation is a CFC that is in its initial year of operation. For the current year, it reports $1 million of earnings and has an aggregate U. S. Property investment of $400,000. If none of the earnings qualified as Subpart F income, explain how the earnings are taxed. 85) Bell Corporation, a domestic corporation, sells jars to its wholly owned foreign subsidiary, Jam. Jam Corporation is incorporated in and pays taxes to Country J. Bell Corporation normally sells jars to a U.S. wholesaler providing services similar to those provided by Jam at a price of $4 per unit. Both wholesalers incur similar costs. If Bell Corporation sells jars to Jam for $3 per unit, what are the tax effects?