Question

Hawkeye Networks is a U.S. corporation with no foreign-source income of its own, but it does have wholly owned subsidiaries in Korea and Singapore. The Korean subsidiary has $43 million of pre-tax Korean-source income, faces a 40% Korean tax rate, and pays a $10 million dividend to Hawkeye Networks. The Singapore subsidiary has $7 million of pretax Singapore-source income, faces a 25% Singapore tax rate, and pays a $2 million dividend to Hawkeye.
a. How much foreign-source income will Hawkeye Networks report on its U.S. tax return?
b. Now suppose the Singapore subsidiary’s income is Subpart F income. How much foreign-source income will Hawkeye Networks report on its U.S. tax return?
c. Make the same assumptions as in part b, but also assume that Hawkeye Networks owns only 38% of the Singapore corporation. Assume Hawkeye Networks’ share of the Singapore corporation’s pretax income remains $7 million and its share of the dividend remains $2 million. The remaining 62% of the Singapore corporation is owned by a Chinese firm. How much foreign-source income will Hawkeye Networks report on its U.S. tax return?


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  • CreatedAugust 06, 2015
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