Subject: International Taxation (subject code: 353915001)
Basic Introduction to US Income Taxation (Week 14)
December 15, 2015 International Taxation (Week 13)
Part I
Basic Concepts
2 International Taxation (Week 13) Sources of US Tax Law
• Federal Law US Internal Revenue Code US Treasury Regulations IRS Rulings and Interpretations Court Cases
• State Law
3 International Taxation (Week 13) Common Business Forms
C Corporation • C Corporation • Limited Liability Company (LLC) • Partnership
• S Corporation Partnership
S Corporation
4 International Taxation (Week 13) C Corporation
Share- Shareholder level tax holders
Corporate level tax: •Federal – 35% C Corporation •States – Vary (i.e., California = 8.84%, Delaware = 8.87%)
Tax return: •Consolidation allowed •Form 1120 •Due 3/15 with Extension 9/15
5 International Taxation (Week 13) Partnership
Partners • Partnership does not pay taxes • Income and losses flow to partners through Schedule K-1 • Tax Return:
Partnership − Form 1065 − Due 4/15 with Extension 9/15
6 International Taxation (Week 13) Limited Liability Company (LLC)
• If 100% owned by a single member disregarded entity • If owned by 2 or more members partnership • Can elect to be treated as a C Corporation (Check-the-box election)
2+ 1 Member Member(s) Members
LLC LLC LLC
7 International Taxation (Week 13) Entity Classification Election (Check-the-box)
• An entity that is not classified as a corporation under the “per se” rules can elect its classification for federal tax purposes • Eligible entities include: - LLC - Partnership - Any foreign entity that is not identified as a “per se” corporation (e.g., Taiwan -- 股份有限公司 vs. 有限公司) • Files Form 8832 to make the election - Not effective more than 75 days prior to the filing date - Not effective more than 12 months after filing date - 60-month limitation rule
8 International Taxation (Week 13) S Corporation
• Small Business Corporation • Taxed in a way similar to partnerships, income and expenses flow through to the owners/shareholders • Qualifications: - Only US citizens or residents can be shareholders - Only one class of stock (no preferred stock may be issued) - Limited to 100 shareholders - Only individuals, estates, certain trusts and certain charities may be shareholders (corporations cannot be shareholders)
9 International Taxation (Week 13) Computation of Taxable Income
+ Gross Income Inclusions
– Gross Income Exclusions
GROSS INCOME Book-to-tax adjustments – Items deductible for tax purposes (i.e., M-1 or M-3 )
+ Items not deductible for tax purposes
TAXABLE INCOME
10 International Taxation (Week 13) Statute of Limitation
• Generally − 3 years from later of due date or date of filing • Under-reported income > 25% − 6 years from later of due date or date of filing • Fraud − Unlimited statute of limitation • Refund claim − Later of 3 years from the time the return was filed
11 International Taxation (Week 13) Net Operating Loss (NOL)
General rule.— Except as otherwise provided in this paragraph, a net operating loss for any taxable year— 172(b)(1)(A)(i) shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss, and 172(b)(1)(A)(ii) shall be a net operating loss carryover to each of the 20 taxable years following the taxable year of the loss.
12 International Taxation (Week 13) Source of Income – General Rules
Personal Service Location of service performed
Sale of Inventory Buy and sell: title passage (e.g., FOB, CIF, DDU, DDP) Produce and sell: allocation (depending on the place of production) Interest Location of interest payer
Dividend Location of dividend payer
Rentals/Royalties Location where property is used
Real Property Sale Location of the real property
Personal Property Sale Seller’s tax home
13 International Taxation (Week 13)
Corporate Formation
14 International Taxation (Week 13) Section 351 Transaction
Individual Corp Transferor Transferor
Newco stock
Assets Assets NEWCO
15 15 International Taxation (Week 13) Section 351 -- Tax Free Contribution
- No gain or loss recognized by transferor shareholders upon: - Transfer of property - Solely in exchange for stock - Transferors control corporation (transferee) immediately after exchange - Mandatory tax-free treatment even if transferors want gain/loss recognition - Transferors can be individuals, corporations, partnerships, etc.
16 16 International Taxation (Week 13) Property
• Cash • Contract rights • Leasehold interests • Goodwill • Employment contracts • Know-how, patents • Services not property
17 17 International Taxation (Week 13) Solely for Stock
• Common • Preferred • Voting • Nonvoting
But not Nonqualified Preferred Stock as defined in §351(g)
18 18 International Taxation (Week 13) Control
• 80% of total combined voting power of all voting classes, • AND • 80% of total number shares of each class of nonvoting stock • Attribution rules do not apply
19 19 International Taxation (Week 13)
Corporate Distribution & Redemption
20 International Taxation (Week 13) Earnings and Profits (E&P)
• History: - The phrase first appeared in the Revenue Act of 1916 - There is no comprehensive definition of the phrase - E&P is related to but different from book income and taxable income • Importance: - A distribution is a dividend to the extent of a corporation’s post-February 28, 1913 E&P
21 21 International Taxation (Week 13) Earnings and Profits (E&P) (con’t)
Common adjustments to taxable income to arrive at E&P: - Federal income taxes - Expenses associated with tax exempt income - Bribes, fines, and penalties - Meals and entertainment - Net premiums on officers’ life insurance - Expenses and losses between related parties
E&P focuses on a company’s ability to pay dividends
22 22 International Taxation (Week 13) Corporate Distributions
• Character of the distribution - Dividend (to the extent of E&P) - Return of capital (to the extent of basis in stock) - Capital gain
• Computation of current E&P - Computed as of the end of the taxable year
23 23 International Taxation (Week 13) Corporate Stock Redemptions
• Redemption – when shareholders sell his/her stock in a company to the company itself
• Sale vs. disguised dividends
24 24 International Taxation (Week 13) Corporate Stock Redemptions
- Some distributions from a corporation to its shareholders are not distributions of earnings and profits, but are in reality a sale or a reduction of the shareholder’s interest in the corporation
- Redemption rules (Section 302) determine whether distributions in redemption of stock should be characterized as sales or as dividend distribution
25 25 International Taxation (Week 13) Corporate Stock Redemptions
• - Redemptions are treated as a sale of stock if paragraph (1), (2), (3), or (4) of §302(b) applies (i.e., capital gain or loss to shareholder)
• - If a redemption fails to meet one of the §302(b) tests, the distribution is treated as a property distribution under §301 (a dividend to the extent of E&P) - §302(d)
26 26 International Taxation (Week 13) Redemption Tests
§ 302 (b)(1)—not essentially equivalent to a dividend • Some reduction in stock ownership • Not in control of the corporation after the transaction
27 International Taxation (Week 13) Redemption Tests (Cont’d)
§ 302 (b)(2)—substantially disproportionate redemption • 50% test—immediately after the redemption, the shareholder owns less than 50% of the voting stock, AND • 80% test—immediately after the redemption, the shareholder owns a percentage of stock which is less than 80% of his percentage of stock immediately before the redemption (based on both voting power and value)
28 International Taxation (Week 13) Redemption Tests (Cont’d)
• § 302 (b)(3) – termination of shareholders interest • Waiver of family attribution rule requirements 1. No interest retained in the corporation other than an interest as a creditor 2. No acquisition of prohibited interest within 10 years of redemption 3. Agree to notify IRS of acquisition of prohibited interest within the 10-year period
29 International Taxation (Week 13)
Corporate Liquidation
30 International Taxation (Week 13) Complete Liquidation
Shareholder
All Corporation stock Corporate assets and liabilities
Corporation
Cessation of Corporation’s Operations
31 International Taxation (Week 13) Complete Liquidations—§336
General Rules for Liquidating Corporation
• - Gain or loss recognized by a liquidating corporation on the distribution of property • - Property treated as sold at FMV • - Gain or loss computed asset by asset
32 International Taxation (Week 13) Complete Liquidations—§331
General Rules for Shareholders - Amounts received in complete liquidation of a corporation are treated as full payment in exchange for the shareholder’s stock - A shareholder’s amount realized is the FMV of the assets received less liabilities - A shareholder’s recognized gain is the amount realized less the shareholder’s basis in the stock
33 International Taxation (Week 13) Complete Liquidation of 80% or more owned Subsidiary
• Tax consequences to the liquidating corporation—§337 - - No gain or loss is recognized by the liquidating corporation on the distribution of property to the parent - - Non-recognition only applies to property actually distributed to the parent
34 International Taxation (Week 13) Complete Liquidation of 80% or more owned Subsidiary
Tax consequences to recipient parent corporation—§332
- Parent must meet the 80% stock ownership test: - Stock possessing at least 80% of all voting power, AND at least 80% of total value of all stock (the 80% control test must be satisfied from the date of adoption of the plan of liquidation until the final distribution) - Subsidiary must be solvent
35 International Taxation (Week 13) Sections 382 NOL Usage Limitation
• Limits the amount of taxable income against which pre- change NOL may be applied if a triggering event results in an ownership change of greater than 50 percentage points.
- Triggering event: Owner shifts or equity structure shifts (i.e. reorganizations) during the testing period (generally 3 years)
36 International Taxation (Week 13) Agenda – Part II
• US Inbound Non-US person’s US income (ECI, FDAP, FIRPTA) Withholding Tax FATCA
• US Outbound CFC Subpart F Foreign Tax Credit
37 International Taxation (Week 13)
US Inbound
38 International Taxation (Week 13) US taxes who and what?
US person Non-US person US source US source
US person Non-US person Non-US source Non-US source
39 International Taxation (Week 13) Taxation of Non-U.S. Persons
• A non-U.S. person generally is taxed in the United States only on its income derived from its U.S. investments or business activities. • The term “U.S. person” includes a U.S. citizen or resident alien individual, a domestic corporation, a domestic partnership, a domestic estate, or a domestic trust. §7701(a). - A “non-U.S. person” or a “foreign person” is any person other than a “U.S. person.” • A non-U.S. person generally is taxed in the United States only on income from U.S. sources.
40 International Taxation (Week 13) Sourcing Rules
• Interest and dividends generally are sourced based on the residence of the payer, with certain exceptions. • Rents are sourced based on where the subject property is located. • Royalties are sourced based on where the property is used or where the property is located, depending upon the type of royalty. • Income from the disposition of U.S. real property is U.S. source. • Compensation for labor or personal services performed in the United States is U.S.-source income.
41 International Taxation (Week 13) Non-US persons are generally taxed on…
Two major types of income:
• ECI • FDAP
42 International Taxation (Week 13) What is ECI?
• Effectively Connected Income (“ECI”)
ECI = “US trade or business” + Income arising from that trade or business
43 International Taxation (Week 13) U.S. Trade or Business
• A non-U.S. person who is engaged in an active trade or business in the United States and earns income from that business generally is taxed on its U.S.-source income that is considered “effectively connected” with that business. • Income that is effectively connected with the non-U.S. person’s U.S. trade or business is taxed on a net basis at graduated rates.
44 International Taxation (Week 13) U.S. Trade or Business
• The term “trade or business within the United States” is defined mainly by U.S. courts and the IRS. - It depends on facts and circumstances and is based on the nature and extent of the corporation’s economic activities in the United States, either directly or through its agents. - A trade or business must have a profit motive. - The IRS generally does not issue rulings with respect to what constitutes a U.S. trade or business.
45 International Taxation (Week 13) U.S. Trade or Business
• Activities generally must be “considerable, continuous, and regular.” • Ministerial, clerical, or collection-related activities generally are not sufficiently profit-oriented to constitute a U.S. trade or business. • Isolated activities generally do not rise to the level of a trade or business. • An agent’s activities in the United States may result in a U.S. trade of business. - Important considerations are whether the agent has the authority to conclude contracts in the United States, and whether the agent regularly exercises that authority in the United States.
46 International Taxation (Week 13) Unlikely to be a U.S. Trade or Business
• Ministerial, clerical or collection-related activities • Investigatory activities/gathering market data • Purchasing of goods for resale abroad • Promotional activities, advertising • Unless the entire business purpose of the company is to carry out these functions
47 International Taxation (Week 13) Effectively Connected Income
Form 1120-F • Non-US corporation required to report certain corporate information and certain worldwide financial information to the IRS • Opens a channel for the IRS to audit books and records • Relevant expense deductions allowed • Requirement to file Form 1120-F depends on whether foreign corporation has U.S. trade or business income, not whether it has taxable income • 35% tax rate plus 30% branch profits tax • If required to file but do not file, all expenses including COGS may be disallowed…this is huge! * Recent IRS audit example on a public Taiwan company 48 International Taxation (Week 13) Branch Profits Tax
• The branch profits tax imposes a 30% branch-level tax on a foreign corporation’s U.S. branch earnings and profits that are effectively connected with a U.S. business. • The 30% branch profits tax can be reduced or eliminated under treaty.
TW Co
Branch income: US 35% regular income tax Branch 30% branch profits tax
49 International Taxation (Week 13) US Sub vs. US fixed place of business or Branch
US Subsidiary US Branch
Taxable Income 100 100
Tax (40%) (40) (40)
Dividend 60* 60 Branch Profit W/H Tax (30%) (18) (18) Tax (30%)
42 42
* This dividend is not subject to withholding tax until it is distributed
50 International Taxation (Week 13) Permanent Establishment vs. US Trade or Business
• Where the foreign person is a tax resident of a jurisdiction with which the United States has an income tax treaty, the permanent establishment rules of the applicable treaty, rather than the U.S. trade or business rules, may apply. • The permanent establishment concept generally provides more certainty and a somewhat higher threshold than the U.S. trade or business rules.
Does Taiwan Co. have (PE, US trade or business) in the US?
51 International Taxation (Week 13) Foreign Investment in U.S. Real Property (“FIRPTA”)
• FIRPTA rules treat the gain or loss on the disposition of a U.S. real property interest (“USRPI”) by a foreign person: - as though the person were engaged in a trade or business within the United States, and - as if the gain or loss were effectively connected with the conduct of that trade or business. • Any gain is subject to U.S. income tax at graduated rates.
FIRPTA gain/loss = ECI
52 International Taxation (Week 13) FIRPTA
• USRPIs include: - Land and buildings, mines, wells or other natural deposits - Stock in a U.S. corporation (presumed to be USRPI)
53 International Taxation (Week 13) FIRPTA
• An interest in a U.S. corporation is a USRPI unless the corporation follows procedures in the regulations to prove it is not a U.S. real property holding corporation (“USRPHC”). - A USRPHC includes any corporation, U.S. or foreign, that has 50 percent or more of its assets in the form of USRPIs. - Any interest in a U.S. corporation, other than an interest solely as a creditor, is statutorily presumed to be a USRPI. ◦ Disposition is subject to U.S. tax and withholding unless it is established that the U.S. corporation has not been a USRPHC for a 5-year period ending on the date of disposition. › Exception – Stock of a U.S. corporation that is regularly traded on an established securities market.
54 International Taxation (Week 13) FIRPTA Notifications
• FIRPTA withholding is required at the time of a disposition, such as the transfer or sale of the shares of a U.S. company, even if it is not a USRPI. - Fulfill notice requirements certifying that the U.S. company is not a USRPHC (§1.897-2(g), §1.1445-2(c)). ◦ This must be initiated prior to the date of transfer. - Fulfill notice requirements certifying that the transferor is not required to recognize gain or loss by reason of a nonrecognition provision (§1.1445-2(d)). ◦ This must be initiated prior to the date of transfer. • Rev. Proc. 2008-27 provides a method to request relief for certain late filings.
55 International Taxation (Week 13) FIRPTA and your clients…
TW Co
US land, US Sub bdg, etc.
Think FIRPTA Think ECI Think US taxes and filing requirements
56 International Taxation (Week 13) Fixed Determinable Annual or Periodic (“FDAP”) Income
A non-U.S. person who does not operate a U.S. trade or business is taxed only on U.S.-source passive-type (FDAP) income. • Includes dividends, interest, rents, and royalties. • Taxed at a rate of 30% on a gross basis, with potential reduction or elimination under a U.S. income tax treaty
57 International Taxation (Week 13) Withholding
• US withholding tax rate = 30% (can be reduced or eliminated under income tax treaty) • The withholding regime is generally designed to place the burden of collecting this U.S. tax on the person from whom the IRS can most readily collect such tax. • The 30% tax imposed on U.S. source FDAP income that is paid to a foreign payee is collected through withholding by the withholding agent. • Form W-8BEN
58 International Taxation (Week 13)
59 International Taxation (Week 13)
Summary 是否為美國來源所得 是 否 US Source Income
為外國來源所得(Foreign 為美國來源所得(US Source Income) Source Income)
該外國企業是否在美國 是否為〝與美國商業或 有或被認定為有〝固定 貿易有效的關連〞 營業場所〞 (Effectively connected (office or fixed place of with US trade or business) business)
否 是
是 否 不被認定為有與 即被認定為有〝與 美國商業或貿易 美國商業或貿易有 〝有效的關連〞 效的關連〞 外國公司必須在美 30%扣繳 國申報所得稅 (Form 1120F) 無須在美課稅 外國公司必須在美 國申報所得稅 (Form 1120F) 60 US Outbound
61 International Taxation (Week 13) Definitions and Foundational Concepts Introduction to Anti-Deferral
What is deferral? • Except in limited cases, foreign corporations are not subject to U.S. tax on foreign income, even if organized by a U.S. taxpayer - If earned directly, the U.S. taxpayer would be subject to tax on such income due to the U.S.’s system of worldwide taxation - However, under U.S. corporate tax rules, income earned by a corporation is generally not taxed in the hands of its shareholders until distributed to the shareholders • Taxpayers therefore could obtain “deferral” from paying U.S. tax on income earned abroad by forming a foreign corporation through which to earn such income. • This opportunity for deferral created an incentive for U.S. investors to invest in, and U.S. companies to operate through, foreign corporations organized in low- or no-tax jurisdictions. 62 International Taxation (Week 13) Definitions and Foundational Concepts When and how do subpart F rules apply? § 951(a) When a U.S. Shareholder owns stock in a foreign corporation on the last day of a taxable year where such foreign corporation qualified as a CFC for an uninterrupted period of at least 30 days during such year, the US U.S. Shareholder must include in income its pro rata share of Subpart F income even though there is no actual distributions from the CFC. Controlled Foreign Corporation (“CFC”) - § 957(a) A foreign corporation that is more than 50% owned by US Shareholders (by vote or value) U.S. Shareholder - § 951(b) A U.S. Person who owns, directly, indirectly, or constructively, 10% or more of the voting power of a foreign corporation.
63 International Taxation (Week 13) Definitions and Foundational Concepts
Example – Assuming A and B are not related, FC is not a CFC
C A B (non- (U.S.) (U.S.) U.S.) 45% 8% 47%
FC (Country X)
64 International Taxation (Week 13) Definitions and Foundational Concepts
Major categories of Subpart F income:
• Foreign Personal Holding Company Income (“FPHCI”) - § 954(c); • Foreign Base Company Sales Income (“FBCSI”) - § 954(d); • Foreign Base Company Services Income (“FBCSvI”) - § 954(e); and
65 International Taxation (Week 13) Foreign Personal Holding Company Income (FPHCI)
Generally includes passive types of income and gains from the sale or exchange of certain types of passively held property
• Dividends, interest, royalties, rents, and annuities • Gains from sale or exchange of property • Certain foreign currency gains
66 International Taxation (Week 13) Foreign Personal Holding Company Income (FPHCI)
Exceptions: There are a variety of exceptions to the definition of FPHCI. Broadly, these exceptions apply to income that results from the conduct of an active business. Exceptions with respect to related intercompany payments include: • Same country dividends/interest from related corporation • Same country rents/royalties from related corporation for use of property within CFC’s country
67 International Taxation (Week 13) Foreign Personal Holding Company Income (FPHCI) Illustrations of FPHCI Exceptions US Corp
CFC 1 CFC 2 (Country A) (Country A) Same country exception
CFC 3 CFC look (Country B) through exception Carries on active business in Country B
68 International Taxation (Week 13) Foreign Base Company Sales Income
Section 954(d)(1) US Corp • FBCSI includes a CFC’s income (whether in the form of profits, commissions, fees, etc.) derived in connection with: The purchase of personal property 2 from a related party (or on behalf of CFC A Sale of Product CFC B a related party); and/or (Country A) (Country B) The sale of personal property to a 1 CFC A manufactures related party (or on behalf of a Product in related party). Country A 3 Sale of Product to … If the personal property was (a) Third Party Customers manufactured outside the CFC’s country located in Country C of incorporation, and (b) purchased or Third Party sold for use, disposition or consumption Customers outside of that country. (Country C)
69 International Taxation (Week 13) Foreign Base Company Sales Income
Manufacturing Exception:
• Same country manufacturing • Physical manufacturing
70 International Taxation (Week 13) Foreign Base Company Services Income
FBCSvI arises when income is derived from the performance of services by a CFC: • For or on behalf of a related person • Outside the country in which the CFC is organized. FBCSvI includes any compensation, commissions, fees, or other income derived from the performance of technical managerial, engineering, architectural, scientific, skilled, industrial, commercial, and similar services.
71 International Taxation (Week 13) Investment of Earnings in U.S. Property
Section 956 A U.S. Shareholder must include in income it’s pro rata share of the U.S. property held by the CFC as determined under section 956. • The rationale for requiring a U.S. Shareholder to include a pro rata share of the CFC’s increased investment in U.S. property is that the investment in U.S. Property represents a repatriation of the earnings of the CFC.
72 International Taxation (Week 13) Investment of Earnings in U.S. Property Which property is in the scope of 956(c)? • Sec. 956(c) defines “United States Property” to include any property acquired after December 31, 1962 which is— - Tangible property located in the United States; - Stock of a domestic corporation; - An obligation of a United States person (or under regulations a pledge or guarantee of such an obligation); or - Any right to the use in the United States of— ◦ A patent or copyright, ◦ An invention, model, or design (whether or not patented), ◦ A secret formula or process, or ◦ Any other similar property right which is acquired or developed by the CFC for use in the U.S. • Definition is not all-inclusive - e.g., it does not appear to include marketing intangibles
73 International Taxation (Week 13) Foreign Tax Credit - Requirements of a Creditable Tax
In general §901(b) allows a credit against U.S. income tax for “any income, war profits and excess profits tax paid or accrued...to any foreign country or to any possession of the United States” • §903 states that the term “income, war profits, and excess profits taxes” shall include a tax paid “ in lieu of ” an income tax
74 International Taxation (Week 13) Non-Creditable Foreign Taxes
• Non-income taxes (property taxes, excise taxes, VAT, etc.)
• Subsidies - Any benefit conferred, directly or indirectly, by the foreign country to the taxpayer - Reg. §1.901-2(e)(3)(ii)
• Taxes paid to “§901(j) countries” - Cuba, Iran, North Korea, etc.
75 International Taxation (Week 13) FTC Example (branch with direct tax)
US Corp • If a US corporation earns foreign income through a branch, the US corporation pays the foreign tax directly and receives a credit under Sec. 901 (i.e., a direct credit)
Foreign Income 1,000€ Foreign Tax $ 250 Foreign • US corporation will include Branch Assume $1 : 1€ $1,000 in gross income and claim a foreign tax credit of $250, subject to any limitation
76 International Taxation (Week 13) FTC Example (foreign subsidiary)
• If a US corporation earns foreign income through a sub and US Corp repatriates all the after-tax profits, the US corporation has not directly paid any foreign taxes and $750 thus can’t receive a Sec. 901 FTC Dividend • However, under §902, the US corporation will treat the $250 of Foreign Income 1,000€ taxes paid by the foreign sub as a Foreign Tax $ 250 Foreign FTC in the U.S. Foreign E&P 750€ Sub • US corporation will include the $1,000 in gross income ($750 Assume $1 : 1€ dividend plus $250 §78 gross-up) and claim a foreign tax credit of $250, subject to any limitation
77 International Taxation (Week 13) §902 Indirect Credit - Qualifications
• Only domestic corporations may claim a § 902 credit
• Domestic corporation must own 10% or more of voting stock of foreign corporation (on date the dividend is received)
78 International Taxation (Week 13) §902 Indirect Credit - Qualifications (cont’d)
• Ownership through a chain of foreign corporations - §902(b)(2)
- At least 10% direct ownership of voting stock at each level in chain - At least 5% indirect ownership of voting stock by US parent down chain - No more than 6 tiers removed from the US parent - 4th to 6th-tier foreign corporations must be CFCs
79 International Taxation (Week 13) Purpose of Sourcing Rules
Gross Income Deductions
Sourcing Rules Allocation & Apportionment
80 International Taxation (Week 13) FTC Formula
Foreign Foreign Source Tax = Taxable Income Credit Within Basket x US Tax Limit Total Taxable Income
81 International Taxation (Week 13) Passive Income Basket
• Passive income is any income that meets the definition of foreign personal holding company income - §954(c)
• Passive income generally includes: - Dividends - Interest - Rents - Royalties - Annuities - Gains from sale of property - Net commodities gains - Net foreign currency gains
82 International Taxation (Week 13) General Limitation Income Basket
• The general limitation basket is the residual basket for all other “unclassified” income
• General limitation income includes - Active trade or business income (high and low taxed) - Export financing interest - High-taxed passive income - Rents and royalties from an active trade or business
83 Thank you for your attendance.