Chapter3 Cases 2008 - International Taxation Source of...

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Source of Income Rules Cases – Chapter 3 Case 1 International Harvester, a multinational company, forms a U.S. corporation to hold the stock of its foreign affiliates. The U.S. holding company borrows $50 million from a U.S. bank, which it relends to the foreign affiliates. Its only source of income is foreign source interest from those loans. It pays interest on the $50 million it borrowed. What is the source of the interest income received from the holding company by the U.S. bank on the $50 million loan? What if this holding company pays a dividend to International Harvester (i.e., what is its source)? See Sec. 861(a) and Reg. Sec. 1.861-3. Case 2 Determine the source of the income for the following payments received in the current year by Jeanette George, who is a U.S. resident. a. $600 of interest income earned on a deposit with the Toronto, Canada, branch of the First Place Bank of New York. b. $1,500 of interest income paid by Genuine Corporation, a domestic corporation that derived 90 percent of its gross income from without the U.S. c. The same $1,500 of interest income earned in b above, except that Genuine Corporation earned 30 percent of its income from foreign sources. d. $400 of income earned on a deposit with the Last Stop Bank of Los Angeles. e.
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This note was uploaded on 09/16/2011 for the course TAX 6527 taught by Professor Andrewjudd during the Spring '11 term at University of Central Florida.

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Chapter3 Cases 2008 - International Taxation Source of...

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