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Unformatted text preview: International Taxation Foreign Tax Credit Cases Read Chapter 4 (pp. 73-105). Case 1 Topco, Inc., a U.S. corporation, conducts business in New Zealand. Topco earned the following amounts from its New Zealand branch: $8,000,000 of general limitation income, and $4,000,000 of passive income. Topco has expenses associated with that income but, under New Zealand law, none of those expenses are allocated to a particular category of income. Applying the principles of Reg. 1.861-8, Topco directly applied $1,500,000 to general limitation income. $600,000 of expenses were not directly allocable to any class of income so those expenses were allocated in proportion to gross income; that is, $400,000 was applied against general limitation income, and $200,000 against passive income. After allocation of expenses, the results are as follows: Net general limitation income 6,100,000 Net passive income 3,800,000 Net taxable income 9,900,000 Under the particular New Zealand laws as applied to Topco, the $3,800,000 of passive income is...
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- Spring '11