Question

FOR QUESTIONS 6 AND 7: ForCo, a corporation that is incorporated in a foreign country and does not have a treaty with the U.S., plans to conduct manufacturing, marketing, and sales operations in the U.S. These U.S. operations produce $5 million of earnings and profits in Year 1. Further assume that the U.S. operations will have a net worth of $20 million at the beginning of Year 1 and $20 million at the end of Year 1. During Year 2, the U.S. branch does not produce any earnings and profits and its net worth is $20 million at the beginning of the year and $10 million at the end of the year.

6) For branch profits tax purposes in Year 1, the dividend equivalent amount for the U.S. branch is as follows:

	a.	$5 million
	b.	$10 million
	c.	$20 million
	d.	$25 million
	e.	$1.5 million

7) For branch profits tax purposes in Year 2, the dividend equivalent amount for the U.S. branch is as follows:

	a.	$5 million
	b.	$10 million
	c.	$20 million
	d.	$25 million
	e.	$3 million

Answer 1

Answer:-

6) a. $5million

7) b. $10 million

Computation:-

6. Calculation or Dividend Equivalent Amour - sou_year 0 1 o ffectively commecked earrings & leaflits $5 million B) Amare are in (os. mor Equrla woth End o_the Year U.S. Ner worth $20 million beginning of year U.S. Ner worth a $20 million Amurense in der Worth 0 Dividend Equivalent amoumra (A) -(B) r Year 1 a $5 milliom-0 $_$5 million -3, Calculation A Dividend Equivalent Amoumr for yean2 (A) Effectively commeerd carcoingsd Crofit o B) Decrease im Urso Net worth Beginning of the year Net worth $20 million food of the year Net W orth $ 10 million 0 Decrean im Networn $ 10 million Dividend Equivalem Amount = for year a A + B 0 + $ 10 milliom $ 10 million 3

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