Kowloon Trading Company, a wholly owned subsidiary incorporated in Hong Kong, imports macadamia nuts from its parent

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Kowloon Trading Company, a wholly owned subsidiary incorporated in Hong Kong, imports macadamia nuts from its parent company in Honolulu for export to various duty-free shops in the Far East. During the current fiscal year, the company imported $2,000,000 worth of nuts and retailed them for $6,000,000. Local income taxes are paid at the rate of 16.5 percent. Profits earned by the Hong Kong subsidiary are retained for future expansion.

Required:
Based on this information, calculate the U.S. parent company’s U.S. tax liability under Subpart F provisions of the Internal Revenue Code.

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International Accounting

ISBN: 9780136111474

7th Edition

Authors: Frederick D. Choi, Gary K. Meek

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