3--U.S. TAXATION OF INTERNATIONAL OPERATIONS # 2

3--U.S. TAXATION OF INTERNATIONAL OPERATIONS # 2 - TO...

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U.S. TAXATION OF INTERNATIONAL OPERATIONS TAX JURISDICTION
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TAX JURISDICTION CRITICAL ISSUES: 1—WHICH PERSONS SHOULD BE TAXED; 2—WHAT INCOME SHOULD BE TAXED
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TAX JURISDICTION BASIS FOR TAXATION: 1—PERSONAL RELATIONSHIP BETWEEN TAXPAYER AND COUNTRY ie citizen, resident, etc 2—ECONOMIC RELATIONSHIP BETWEEN TAXPAYER AND COUNTRY ie persons deriving income from within a country
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TAX JURISDICTION BASIS FOR TAXATION (cont.) Current U.S. tax system looks to the personal relationship approach for citizens, residents, etc. whereas the source of income is the approach used to tax nonresidents and foreign corporations.
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TAX JURISDICTION POTENTIAL FOR DOUBLE TAXATION HOME COUNTRY MAY WANT TO TAX INCOME ALREADY TAXED BY THE HOST COUNTRY DUE TO THE PERSONAL RELATIONSHIP IN THE HOME COUNTRY. IT IS THE RESPONSIBILITY OF THE HOME COUNTRY
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Unformatted text preview: TO ALLEVIATE DOUBLE TAXATION, TO THE EXTENT PRACTICABLE TAX JURISDICTION • DOUBLE TAXATION HOME COUNTRY CAN EMPLOY ONE OF TWO METHODS IN A UNILATERAL ATTEMPT TO AVIOD DOUBLE TAXATION:--ALLOW A FOREIGN TAX CREDIT;--EMPLOY TERRITORIAL SYSTEM TAX JURISDICTION DOUBLE TAXATION COUNTRIES WISHING TO AVOID DOUBLE TAXATION OF ITS CITIZENS MAY ENTER INTO INTERNATIONAL TAX TREATIES, WHICH ARE BILATERAL AGREEMENTS THAT EMPLOY RECIPROCAL EXEMPTIONS AND LOWER TAX RATES. TAX JURISDICTION • DOUBLE TAXATION THE U.S. GENERALLY EMPLOYS THE CREDIT SYSTEM TO ALLEVIATE DOUBLE TAXATION—HOWEVER, DUE TO FTC LIMITATIONS, IT OFTEN DOES NOT ELIMINATE DOUBLE TAXATION. TAX JURISDICTION • EXCEPTIONS TO THE U.S. CREDIT SYSTEM: • a) DEFERRAL; • b) FOREIGN EARNED INCOME EXCLUSION TAX JURISDICTION...
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This note was uploaded on 11/14/2011 for the course TAX 550 taught by Professor Smith during the Spring '11 term at Cleveland State.

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3--U.S. TAXATION OF INTERNATIONAL OPERATIONS # 2 - TO...

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