Reference no: EM132462234

Egor, a United States citizen, is engaged in numerous, diverse operations and pays U.S. income tax at a rate of 37%. Egor owns MY LLC, a disregarded entity for U.S. tax purposes. MY LLC manufactures the ubiquitous product, widgets. U.S. sales result in $100,000 of taxable U.S.-source income. Egor projects that he could earn approximately $100,000 of net income in the United Kingdom (the "U.K."), where the corporate income tax rate is 20%. To further limit his liability (widgets being a very dangerous product); Egor's MY LLC forms a private limited company in the United Kingdom. The private limited company in the U.K. is not a "per se" entity and, therefore, Egor (via the MY LLC) would consider checking-the-box to treat the private limited company in the U.K. as a disregarded entity. Assume that both the withholding tax rate on any dividends from a U.K. private limited company to the United States is 15% and that the title on all widget sales passes in the U.K.

Question a. If the U.K. private limited company is "checked," what is Egor's foreign tax credit position in Year 1 if an $80,000 dividend is distributed for U.K. tax purposes?

Question b. If the U.K. private limited company is "checked," what is Egor's foreign tax credit position in Year 1 if a dividend is not distributed for U.K. tax purposes?

Question c. What is Egor's foreign tax credit position in Year 1 if the U.K. private limited company is not "checked" as a disregarded entity and pays a dividend of $80,000 to the MY LLC?

Question d. What is Egor's foreign tax credit position in Year 1 if the U.K. private limited company is not "checked" as a disregarded entity and does not pay a dividend?