Question: TechGlobal Inc., a US corporation with annual gross receipts of $600 million, has the following international structure:1. IrishHoldCo: A wholly-owned Irish holding company that owns valuable IP with a tax basis of €50 million2. IrishOpCo: An Irish operating company owned by IrishHoldCo (check-the-box election filed to treat as disregarded for US tax purposes)3. GermanCo: A German GmbH wholly owned by IrishHoldCo4. SingaporeCo: A Singapore subsidiary wholly owned by TechGlobal (no check-the-box election)The following transactions occur in 2023:- TechGlobal pays IrishHoldCo €30 million in royalties for US rights to the IP- IrishHoldCo licenses IP to GermanCo for €15 million annually- IrishOpCo provides R&D services to IrishHoldCo valued at €8 million- GermanCo sells products to European customers generating €40 million in revenue and €12 million in profit- SingaporeCo provides management services to all entities, charging:  * €5 million to TechGlobal  * €3 million to IrishHoldCo  * €2 million to GermanCo- TechGlobal sells products directly to foreign customers, generating $50 million in foreign sales income with $20 million in profit- TechGlobal has deductible payments to foreign related parties totaling $45 millionAdditional information:- Ireland's corporate tax rate: 12.5% for trading income, 25% for passive income- Germany's corporate tax rate: 15% plus 5.5% solidarity surcharge- Singapore's corporate tax rate: 17%- TechGlobal's modified taxable income for BEAT purposes is $200 million before considering base erosion payments- TechGlobal has qualified business asset investment (QBAI) of $100 millionRequired:1. Calculate TechGlobal's GILTI inclusion, identifying tested income and Subpart F income from each CFC. (7 points)2. Calculate TechGlobal's FDII deduction under §250. (5 points)3. Determine if TechGlobal is subject to BEAT under §59A and calculate any BEAT liability. (4 points)4. Analyze whether IrishHoldCo's royalty structure creates a US trade or business under §864(c) or permanent establishment issues under the US-Ireland tax treaty (Article 5). (3 points)5. Calculate TechGlobal's total US tax liability, including available foreign tax credits. (4 points)6. Recommend one restructuring option that could minimize the global effective tax rate while complying with OECD BEPS 2.0 Pillar Two's 15% global minimum tax. (2 points)

1. GILTI and Subpart F Calculations (7 points)[+0.5] For correctly identifying IrishHoldCo and IrishOpCo as a single CFC for US tax purposes due to the check-the-box election under Treas. Reg. §301.7701-3[+0.5] For calculating IrishHoldCo/IrishOpCo combined income as €37M (€30M + €15M - €8M)[+0.5] For correctly identifying the €30M US royalties as FPHCI under §954(c)[+0.5] For correctly analyzing the potential application of §954(c)(6) look-through rule to the €15M royalties from GermanCo[+0.5] For correctly determining GermanCo's tested income of €12M[+0.5] For correctly analyzing SingaporeCo's income under §954(e) foreign base company services income rules[+0.5] For correctly calculating total tested income from all CFCs[+0.5] For correctly applying the QBAI exemption of 10% × €90M = €9M under §951A(b)(2)(A)[+0.5] For correctly calculating the GILTI inclusion amount of €8M[+0.5] For correctly applying the §250 deduction for GILTI (50% × €8M = €4M)[+1.0] For correctly identifying which income streams qualify as Subpart F income under §952 with appropriate citations[+1.0] For correctly applying any high-tax exceptions under §954(b)(4) with calculations2. FDII Calculation (5 points)[+1.0] For correctly identifying foreign-derived deduction eligible income (FDDEI) of $20M[+1.0] For correctly calculating deemed intangible income (DII) as $10M by reducing FDDEI by 10% of QBAI per §250(b)(2)(B)[+1.0] For correctly calculating the foreign-derived ratio as FDDEI ÷ DEI (not gross receipts) per §250(b)(4), where DEI includes all domestic and foreign income excluding certain categories like Subpart F, GILTI, foreign branch income, and financial services income[+1.0] For correctly calculating FDII as $0.833M ($10M × 8.33%)[+1.0] For correctly calculating the FDII deduction of $0.312M (37.5% × $0.833M) under §250(a)(1)(A)3. BEAT Calculation (4 points)[+0.5] For correctly identifying TechGlobal as meeting the gross receipts threshold under §59A(e)(1)(B)[+0.5] For correctly calculating the base erosion percentage using the $45M base erosion payments[+1.0] For correctly determining if the base erosion percentage exceeds the 3% threshold in §59A(e)(1)(C)[+1.0] For correctly calculating modified taxable income of $245M ($200M + $45M)[+1.0] For correctly calculating the BEAT liability of $24.5M (10% × $245M)4. US Trade or Business/Permanent Establishment Analysis (3 points)[+1.0] For correctly analyzing whether IrishHoldCo has a US trade or business under §864(c) with appropriate citations, including Revenue Ruling 80-209 and more recent authorities such as Commissioner v. Piedras Negras Broadcasting Co., 127 F.2d 260 (5th Cir. 1942), Taisei Fire & Marine Insurance Co. v. Commissioner, 104 T.C. 535 (1995), or PLR 200747001 regarding licensing activities[+1.0] For correctly analyzing the permanent establishment factors under Article 5 of the US-Ireland tax treaty[+1.0] For correctly citing and applying Revenue Ruling 80-209 regarding licensing activities and discussing the dependent agent provisions5. Total US Tax Liability Calculation (4 points)[+1.0] For correctly calculating the regular corporate tax on all income sources (21% rate)[+1.0] For correctly applying GILTI and FDII deductions from §250[+1.0] For correctly calculating foreign tax credit limitations under §904 for each separate basket (passive, GILTI, general)[+0.5] For correctly applying the 80% limitation on GILTI foreign tax credits under §960(d)[+0.5] For correctly determining the final tax liability including any BEAT liability6. Restructuring Recommendation (2 points)[+0.5] For recommending a structure that addresses BEPS 2.0 Pillar Two's 15% minimum tax[+0.5] For including appropriate substance requirements in the restructuring plan[+0.5] For correctly applying §482 and cost-sharing regulations in the restructuring[+0.5] For recommending appropriate elections (e.g., high-tax exclusion under §954(b)(4) and Treas. Reg. §1.951A-2(c)(7))


Question: MegaCorp, a U.S. C-corporation, has the following international structure and transactions in 2023:1. Wholly-owned German subsidiary GermCo (treated as a corporation for both U.S. and German tax purposes)2. 75% owned Swiss entity SwissCo (a Swiss GmbH checked to be treated as a partnership for U.S. tax purposes)3. German branch operation (directly operated by MegaCorp)4. A Luxembourg financing entity LuxCo (wholly-owned and treated as a disregarded entity for U.S. tax purposes)For 2023, MegaCorp reports:- U.S. domestic income: $50 million- FDII-eligible income: $15 million- Base erosion payments to GermCo: $8 million- German branch income: $7 million (paid $1.75 million German tax)GermCo reports:- Manufacturing income: €20 million- QBAI: €100 million- German tax paid: €4 million- GermCo made a €2 million interest payment to LuxCo (treated as deductible in Germany)SwissCo reports:- Swiss-source income: CHF 12 million- French-source income from French PE: CHF 8 million- Swiss tax paid: CHF 1.2 million- French tax paid: CHF 2 million- SwissCo has a hybrid debt instrument with a third party that is treated as debt in Switzerland but as equity for U.S. tax purposes, paying CHF 1 million in interestLuxCo:- Received the €2 million interest from GermCo- Paid no tax in Luxembourg under a special tax ruling- Made a $1.5 million interest payment to MegaCorpRequired:Calculate MegaCorp's U.S. tax position, including all relevant foreign tax credit calculations. Your answer should address GILTI inclusions, Section 250 deductions, income basketing under Section 904(d), the application of Section 267A to hybrid arrangements, BEAT calculations, and the foreign tax credit limitations for each basket. Assume a 1.1 exchange rate for all currencies to USD.

[+0.15] For correctly calculating GermCo's GILTI inclusion as $11 million ($22 million tested income minus $11 million net deemed tangible income return) and applying the 50% Section 250 deduction to arrive at $5.5 million taxable GILTI[+0.10] For correctly identifying the Section 267A issue with the GermCo to LuxCo payment and increasing the GILTI inclusion by $2.2 million (€2 million × 1.1) to $13.2 million due to the disallowed deduction[+0.10] For correctly calculating the deemed paid taxes under Section 960(d) as $3.52 million ($4.4 million × 80%)[+0.15] For properly basketing all income streams:- GILTI basket: $13.2 million (revised GILTI)- Foreign branch basket: $7 million- General basket: $16.5 million ($9.9 million Swiss + $6.6 million French)- Passive basket: $1.5 million (LuxCo interest)[+0.10] For correctly calculating the FDII deduction as $5.625 million (37.5% × $15 million) and properly analyzing the Section 250(a)(2) limitation[+0.10] For correctly calculating MegaCorp's BEAT liability:- Regular tax liability: $15.87 million- Modified taxable income: $83.575 million- BEAT minimum tax: $8.36 million- Determining no additional BEAT tax applies[+0.25] For correctly calculating all FTC limitations under Section 904:- GILTI basket: $1.16 million limitation (credits limited from $3.52 million)- Foreign branch basket: $1.47 million limitation (credits limited from $1.75 million)- General basket: $3.47 million limitation (available credits $2.64 million)- Passive basket: $0.32 million limitation (no available credits)[+0.05] For correctly applying the attribution requirement in Treas. Reg. §1.901-2(b)(5) to the French taxes and analyzing whether they satisfy the net gain requirement under T.D. 9959


Question: Atlas Global Inc., a U.S. corporation, has the following structure and transactions in 2023:1. 100% ownership of Rhein GmbH (Germany) and Danube AG (Austria)2. Rhein GmbH has:   - €15 million manufacturing income   - €5 million foreign base company sales income   - €3 million royalty income from licensing IP to unrelated parties   - €2 million interest income from a hybrid financing arrangement with Danube AG   - QBAI of €50 million   - Paid €6.25 million in German taxes (25% effective rate)3. Danube AG has:   - €8 million manufacturing income   - €4 million in royalty payments to Atlas Global   - €2 million in interest payments to Rhein GmbH (deductible in Austria)   - QBAI of €20 million   - Paid €2.5 million in Austrian taxes (25% effective rate)4. Atlas Global Inc. (U.S. parent) has:   - $25 million U.S. source income   - $10 million foreign-derived intangible income (FDII) from direct sales to foreign customers   - $4 million royalty income from Danube AG   - $6 million in base erosion payments to Rhein GmbH for management services   - $3 million in interest payments to an unrelated foreign bank   - QBAI of $100 millionRequired:a) Analyze whether the interest payments from Danube AG to Rhein GmbH constitute a hybrid arrangement under Section 267A and the implications for U.S. tax purposes.b) Calculate Atlas Global's Subpart F and GILTI inclusions, considering the high-tax exceptions under both Treas. Reg. §1.954-1(d) and §1.951A-2(c)(7).c) Calculate Atlas Global's FDII deduction under Section 250, and explain how the taxable income limitation under Section 250(a)(2) might apply.d) Determine the foreign tax credits available under Sections 960(a) and 960(d), considering the U.S.-Germany tax treaty's provisions on withholding taxes for royalties (Article 12).e) Calculate Atlas Global's BEAT liability under Section 59A, if any.f) Determine Atlas Global's total U.S. tax liability after all credits and deductions.

[+0.1] For correctly analyzing that the interest payment from Danube AG to Rhein GmbH is not a disqualified hybrid arrangement under Section 267A because the interest is included in Rhein's income and taxed at the regular German rate (25%)[+0.15] For correctly calculating Subpart F income:- [+0.05] For identifying €5 million foreign base company sales income- [+0.05] For determining the high-tax exception applies (25% > 18.9%)- [+0.05] For concluding Subpart F inclusion is €0 if the high-tax exception is elected[+0.15] For correctly calculating GILTI:- [+0.05] For calculating combined tested income of €33 million (with Subpart F exception)- [+0.05] For calculating deemed tangible income return of €7 million (€70M QBAI × 10%)- [+0.05] For determining GILTI inclusion of €26 million (€33M - €7M)[+0.15] For correctly calculating FDII:- [+0.05] For calculating deduction eligible income (DEI) of $36 million- [+0.05] For calculating deemed intangible income of $26 million ($36M - $10M)- [+0.05] For determining FDII of $10.11 million and FDII deduction of $3.79 million (37.5%)[+0.15] For correctly calculating foreign tax credits:- [+0.05] For determining foreign taxes attributable to tested income (€7.5M)- [+0.05] For applying the 80% limitation to GILTI FTCs (€6M)- [+0.05] For calculating the FTC limitation of €2.73M ((€26M - €13M) × 21%)[+0.15] For correctly calculating BEAT liability:- [+0.05] For identifying $6M in base erosion payments- [+0.05] For calculating modified taxable income (regular taxable income + $6M)- [+0.05] For applying the 10% BEAT rate and determining if additional tax is owed[+0.15] For correctly calculating total U.S. tax liability:- [+0.05] For calculating U.S. tax on domestic income ($8.19M)- [+0.05] For calculating U.S. tax on GILTI after Section 250 deduction (€2.73M)- [+0.05] For determining net U.S. tax after credits ($8.19M plus any BEAT liability)


Question: TechGlobal Inc., a US corporation, has the following international structure and transactions in 2023:1. A wholly-owned Irish subsidiary (IrishTech) with:   - Foreign base company sales income: $3 million (taxed at 12.5%)   - Foreign personal holding company income: $2 million (taxed at 25%)   - Active business income: $4 million (taxed at 12.5%)   - QBAI of $15 million2. TechGlobal has US operations with:   - Domestic gross receipts: $50 million   - Foreign-derived gross receipts from direct exports: $30 million   - Deduction eligible income: $25 million   - QBAI: $40 million3. TechGlobal makes the following payments to IrishTech:   - Royalty payments: $8 million (subject to 0% withholding under US-Ireland treaty)   - Service fees: $5 million4. IrishTech has a branch in Germany that constitutes a permanent establishment under the Ireland-Germany tax treaty, generating $1.5 million of the active business income, which is taxed at 30% in Germany.Calculate TechGlobal's:a) Subpart F inclusion after applying the branch rule under §954(d)(2) and high-tax exception under §954(b)(4)b) GILTI inclusion under §951Ac) FDII deduction under §250d) Total US tax liability after foreign tax creditsShow all calculations and cite relevant Code sections.

[+0.15] For correctly applying the branch rule under §954(d)(2) to recharacterize $1.5 million of active income as FBCSI[+0.10] For correctly identifying total potential Subpart F income as $6.5 million ($3M original FBCSI + $1.5M branch FBCSI + $2M FPHCI)[+0.10] For correctly applying the high-tax exception under §954(b)(4) to exclude the $2M FPHCI (25% > 18.9%) and $1.5M German branch income (30% > 18.9%)[+0.05] For correctly calculating final Subpart F inclusion as $3 million[+0.10] For correctly calculating tested income of $6 million ($2.5M remaining active + $2M excluded FPHCI + $1.5M excluded branch income)[+0.05] For correctly calculating net deemed tangible income return as $1.5 million ($15M QBAI × 10%)[+0.05] For correctly calculating GILTI inclusion as $4.5 million ($6M - $1.5M)[+0.10] For correctly calculating FDDEI as $15 million ($25M × $30M/$50M)[+0.05] For correctly calculating deemed tangible income return as $4 million ($40M QBAI × 10%)[+0.05] For correctly calculating deemed intangible income as $21 million ($25M - $4M)[+0.05] For correctly calculating FDII as $12.6 million ($21M × $15M/$25M)[+0.05] For correctly calculating FDII deduction as $4.725 million ($12.6M × 37.5%)[+0.05] For correctly calculating US tax on domestic income as $4.258 million (($25M - $4.725M) × 21%)[+0.05] For correctly calculating US tax on Subpart F income as $630,000 ($3M × 21%)[+0.05] For correctly calculating FTC for Subpart F as $375,000 ($3M × 12.5%)[+0.05] For correctly calculating US tax on GILTI as $472,500 ($4.5M × 21% × 50%)[+0.05] For correctly calculating FTC for GILTI (80% limitation under §960(d))[+0.05] For correctly calculating the total US tax liability by combining all components and applying appropriate FTCs