(a.) Calculate Lions-US’s Global Intangible Low-Taxed Income (“GILTI”) inclusion and its Foreign-Derived Intangible Income (“FDII”) deduction, including U.S. taxable income and the U.S. residual tax, if any, due after taking an IRC Section 960 deemed foreign tax credit.

(b.) If Lions-US were to pay a dividend in 2019 and one of its shareholders was a foreign individual residing in a country that does not have an income tax treaty with the United States, are there any U.S. withholding requirements with respect to this dividend payment? Please explain.

Lions Pride, Inc. (“Lions-US”), a domestic C-Corporation with a calendar year end, manufactures sporting equipment in its plant in Detroit, Michigan. On January 1, 2019, Lions-US forms a wholly-owned subsidiary in the United Kingdom, Tigers Sales Limited (“Tigers-UK”), which also has a calendar year end and is treated as a foreign corporation for U.S. tax purposes. Tigers-UK purchases sporting equipment manufactured by Lions-US in the United States and markets, sells, and distributions these products throughout the United Kingdom.

In calendar year 2019, Tigers-UK generated $2,500,000 of foreign-source taxable income, under U.S. tax principles, and paid $450,000 of U.K. income taxes, resulting in CFC tested income of $2,050,000. For the record, Lions-US is not a U.S. shareholder in any other foreign corporation. Also, for calendar year 2019, Tigers-UK’s Qualified Asset Business Investment (“QABI”) was $500,000, and no interest expense deduction was taken into account in determining Tigers-UK’s foreign-source taxable income.

In calendar year 2019, Lions-US’s deduction eligible income was $120,000,000, and its foreign-derived deduction eligible income $24,000,000. Also, for calendar year 2019, Lions-US’s Qualified Asset Business Investment (“QABI”) was $800,000,000.

Assume that Lions-US’s 2019 corporate income tax return only includes deduction eligible income and its Global Intangible Low-Taxed Income (“GILTI”) inclusion from Tigers-UK, plus the IRC Section 78 gross-up, and no U.S. expenses are allocated and apportioned against the GILTI inclusion. Also, the U.S. corporate tax rate is 21 percent.

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