Page 745 - Large Business IRS Training Guides
P. 745
Example 1:
Foreign income taxes deemed paid under
section 960(a)(1) with respect to a section 965(a)
inclusion
All corporations have • USP’s section 965(a) inclusion
a 12/31/17 tax year. amount
is: $200
USP All corporations have
a U.S. dollar functional • USP’s deemed paid taxes before
currency disallowance are (S.960(a)(1)):
S. 965(a) inclusion x Post-1986 foreign
Post-1986 undistributed earnings income taxes
CFC $200 X $40 = $40
$200
• USP’s applicable percentage is:
• DFI: $200
• Cash: $120 (($120 / $200) * 55.7%) + (($80 / $200) * 77.1%) = 64.26%
• Post-1986 undistributed earnings: $200
(S.902(c)(1)) • Before considering the foreign tax
• Post-1986 foreign income taxes: $40 credit limitation, USP’s allowed
(S.902(c)(2)) deemed paid taxes are:
$40 x (1-64.26%) = $14.30
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