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International tax basics

TCP Chapter 7 · Area II · Blueprint II.A.4

A U.S. corporation is taxed on its worldwide income, and a foreign corporation is taxed on its U.S. business income and on certain U.S. investment income. Where income comes from (its source) decides how much foreign tax can be credited and what a foreign company owes here. The Blueprint asks you to explain the sourcing rules, U.S. withholding on foreign corporations, permanent establishments, the difference between a foreign branch and a foreign subsidiary and the controlled foreign corporation rules, and to calculate U.S. and foreign source income. Tessa and Leo advise Summit Valve Corp., an Ohio manufacturer with a German branch and a Mexican subsidiary, and Nordlicht GmbH, a German company selling into the United States.

In this chapter

  1. Where does income come from? The source rules
  2. Calculating U.S. and foreign source income
  3. A foreign corporation with U.S. operations
  4. Permanent establishment
  5. Foreign branch or foreign subsidiary
  6. Controlled foreign corporations

This chapter has 6 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

Chapter 6: C corporation losses and consolidated returns · Chapter 8: S corporations: shareholder basis and transactions