iii. Capital losses reduced by amount equal to rate differential portion of excess of NCG from source within US over NCG c. (C) Allowance for regulations d. US tax on WWI e. FSI/WWI x US WWI tax f. Calculation done twice, one for passive income and once for active i. §904(f) Foreign losses divided into baskets as well 3. FTC = Lesser or Step 1 or Step 2 9
INBOUND TAXATION Nonresident – US Source 1. Non USTB a. Gross tax 30% (§871(a) 30% tax on income not connected w/ USTB) i. §871(a)(1)(A) FDAP “fixed or determinable annual or periodical gain, profits and income” b. Treaty/§ reduction c. No deductions 2. USTB (definition next page) – ECI (effectively connected income) a. Graduated rates (§871(b)) i. §871(d) election to treat real property as income connected w/ USTB b. Treaty adjustments – PE c. Deductions to ECI (§873 (a) – deductions allowed only for ECI and only to extent deduction are connected to USTB) i. §873(b) exceptions (losses, charitable contributions, personal exemption) 3. Exceptions a. 897 – foreign investment in real property in US b. Branch profits tax Unit 7: Investment Income (problems p. 29-31) First step source the income Individuals - §§871-872 §871(a) – 30% tax on income not connected w/ USTB (1) Income other than capital gains – tax imposed on: o (A) Interest , dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits and income (FDAP) o (D) Sale of intangibles (2) Net capital gains allocable to sources within US of aliens present in US 183 days or more during the taxable year (3) Social security benefits o 85% of benefit included in GI §871(b) Income connected w/ USTB taxed at graduat ed rates , GI is only that connected w/ conduct of USTB §871(c) participants in exchange or training program treated as NR in USTB §871(d) Election to treat real property income as income connected w/ USTB §871(f) certain annuities received under qualified plans §871(g) special rules for original issue discount §871(h) Portfolio interest exception for NR alien 11
(1) No tax imposed on portfolio interest received by nonresident individual from sources within the US (2) Portfolio interest means any interest which o Would be subject to tax under (a) and o Is paid on an obligation Which is in registered form, and With respect to which US person who would otherwise be required to deduct and withhold tax from interest receives a statement that beneficial owner of the obligation is not a US person or Secretary has determined that such a statement is not required in order to carry out the purposes of this subsection (3) Does not include interest received y 10% or more s/h (4) Does not include contingent interests Corporations - §881(a) and (b) §881 Tax on Income of FC not Connected w/ USTB (a) Imposition of Tax – 30% received by FC from US source as o (1) FDAP o (4) Gains from sale of intangibles (c) No tax on interest from portfolio debt investments o Must not be from a related party (10% threshold) (§881(c)(3)(B)) o
You've reached the end of your free preview.
Want to read all 23 pages?
- Spring '14
- Taxation in the United States, Foreign corporation