Compute cholatis branch profits tax

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Reference no: EM13337044

Cholati is a foreign corporation that produces fi ne chocolates for sale worldwide. Cholati markets it chocolates in the United States through a branch sales offi ce located in New York City. During the current year, Cholati's effectively connected earnings and profi ts are $3 million, and its U.S. net equity is $6 million at the beginning of the year, and $4 million at the end of the year. In addition, a review of Cholati's interest expense account indicates that it paid $440,000 of portfolio interest to an unrelated foreign corporation, $200,000 of interest to a foreign corporation which owns 15% of the combined voting power of Cholati's stock, and $160,000 of interest to a domestic corporation.

 Compute Cholati's branch profi ts tax, and determine its branch interest withholding tax obligations. Assume that Cholati does not reside in a treaty country.

Reference no: EM13337044

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