Please help with tax problems

Nov 25th, 2014
Price: $10 USD

Question description

1. Martinho is a citizen of Brazil and lives there year-round. He has invested in a plot of Illinois farmland with a tax basis to him of $1 million. Martinho has no other business or investment activities in the United States. He is not subject to the alternative minimum tax.

a. Upon sale of the land for $1.5 million to Emma, an Illinois person, what are the Federal income tax consequences to Martinho?

Create, Inc., produces inventory in its foreign manufacturing plants for sale in the United States. Its foreign manufacturing assets have a tax book value of $5 million and a fair market value of $15 million. Its assets related to the sales activity have a tax book value of $200000 and a fair market value of $50000. Create s interest expense totaled $300000 for the current year.

a. What amount of interest expense is allocated and apportioned to foreign-source income using the tax book value method? What amount of Create s interest expense is allocated and apportioned to foreign-source income using the fair market method?

 b. If Create wishes to maximize its FTC, which method should it use?

Tutor Answer

(Top Tutor) Daniel C.
School: Carnegie Mellon University

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Dec 1st, 2014
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