Reference no: EM131611443

Q1. Ramy Corporation, a U.S Corporation, incorporates Amr Corporation, a new wholly owned entity in Germany. Under both U.S. and German law, this entity is a corporation. Ramy Corporation faces a 35% U.S. Tax rate and Amr Corporation faces a 20% German Tax rate. Germany also imposes a 5% withholding tax on dividends. Amr earns $1,500,000 in net profits from its German activities.

How much U.S. income tax will Ramy Corporation pay for the current year as a result of Amr Corporation's earnings, assuming (1) no dividend payment, (2) a dividend payment, and (3) characterization of the earnings as Subpart F Income. Explain.

Q2. Amr Corporation reports the following results for 2015:

Taxable Income                                                                   400,000

Federal income taxes per books                                            135,000

Tax Exempt Interest Income                                                 80,000

Interest on loans to purchase tax exempt bonds                     20,000

Book Depreciation exceeding tax depreciation                        30,000

Net Capital Gain                                                                   25,000

Insurance Premium on life of Corporate Officer                       5,000

Excess Charitable contributions carried over to next year         15,000

NOL carryover to 2015                                                          40,000

Compute Income Per Books after Tax.

Q3. Squash Corporation has nexus in Kentucky, New York, and New Jersey. It generated the following income and deductions in 2015:

Sales (net)                                                                         7,000,000

Ordinary Operating Expenses                                               5,000,000

Federal Tax Depreciation                                                     600,000

Kentucky Tax Depreciation                                                  150,000

NY Tax Depreciation                                                            200,000

NJ Tax Depreciation                                                             50,000

Interest Income on Federal Obligations                                  200,000

Interest income on NY Obligations                                          100,000

Loss (Ordinary) on Disposal of NY Plant                                  400,000

Gain (Ordinary) on Disposal of NJ plant                                  500,000

NOL Carryover from 2014                                                   800,000

A. Determine Federal Taxable Income

B. Determine NY Taxable Income

C. Determine NJ Taxable Income

D. Determine Kentucky Taxable Income

The activities in NY, NJ and Kentucky are as follows:

                      NY                              NJ                               Kentucky                     Total

Sales              1,000,000                   8,400,000                   5,000,000                   14,400,000

Property         500,000                      1,500,000                   300,000                      2,300,000

Payroll            800,000                      3,000,000                   2,000,000                   5,800,000

NY uses a three factor formula under which sales, property and payroll are equally weighted. NJ uses a single factor formula that consists of sales. Kentucky uses a three factor formula under which sales are counted twice and property and payroll are equally weighted.

NY and NJ do not permit NOL Carryovers. Kentucky does permit NOL carryovers.