The German citizen F lives in Dallas, Texas. He spends 320 days in Dallas and the remaining days in Country C, where he enjoys the sunshine and a nice hotel located at a beach. He is invested in two partnerships located in Dallas. In both, he has a stake of 50%. One partnership realizes a profit of $ 64,000 before taxes. The other partnership earned a profit of $ 110,000 before taxes.

He is also an investor of the Beta-Corporation, located in Country C. He owns 100% of Beta. The corporation makes a pre-tax profit of $ 120,000. Country C has a corporate tax rate of 21%. After paying corporate taxes, Beta distributes the net income as dividends to F. The double tax treaty between the United States and Country C includes a withholding tax on dividends of 20%. The U.S. applies the credit system on dividends for individuals like F, and grants a tax credit for the withholding taxes.

1. In which country is F a tax resident and a non-resident?
2. Please calculate F’s overall tax burden on his worldwide income using the U.S. tax rates from the slide deck. Note: You can ignore state and local taxes in the U.S.
3. Would F benefit if Beta-Corp? moves from country C to Dallas, assuming that the estimated annual costs for moving Beta-Corp. are (i) $ 2,000 or (ii) $ 9,000

Answer rating: 100% (QA)

1 F is a tax resident of the United States and a nonresident of Country C 2 F... View the full answer