Chapter 8 Cases 2010 - International Taxation Tax Treaty...

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International Taxation Tax Treaty Cases (from “A Practical Guide to U.S. Taxation of International Transactions”) Read, Chapter 8 – Use the Worldwide Tax Rate Calculator Worksheet (Excel file) that is downloadable from the course website. Case 1 . Growco, a domestic corporation, is a tire manufacturer. Growco is planning to build a new production facility, and has narrowed down the possible sites for this new plant to either Happystan (a low tax foreign country) and Sadstan (a high tax foreign country.) Growco will structure the new facility as a wholly owned foreign subsidiary, Sproutco, and finance Sproutco solely with an equity investment. Growco projects that Sproutco’s results during its first year of operations will be as follows: Sales $400,000,000 Cost of Goods Sold (290,000,000) Selling, general, and administrative expenses (60,000,000) Net Profit $50,000,000 Assume that the U.S. corporate tax rate is 35%, the Happystan rate is 20%, and the Sadstan rate is 40%. Further assume that both Happystan and Sadstan impose a 5%
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Chapter 8 Cases 2010 - International Taxation Tax Treaty...

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