Explore BrainMass

Explore BrainMass

    U.S. Taxation of International Transactions and Consequences

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Beatco, an accrual basis domestic corporation, manufactures musical instruments for sale both in the United States and abroad. Beatco's functional currency is the U.S. dollar. Two years ago, Beatco established a branch sales office in Switzerland. The sales office qualifies as a qualified business unit with the Swiss franc (SF) as its functional currency. The branch's tax attributes for its first two years of operations are as follows:
    Year 1 Year 2
    Taxable income SF40 million None
    Foreign income taxes (paid at end of year) SF15 million None
    Remittance to Beatco (paid at end of year) None SF25 million

    The Swiss franc had an average daily value of $0.50 during Year 1, $0.65 during Year 2, and was worth $0.60 at the end of Year 1, and $0.75 at the end of Year 2.

    What are the U.S. tax consequences of the branch's activities in Year 1 and Year 2?

    © BrainMass Inc. brainmass.com June 4, 2020, 2:24 am ad1c9bdddf

    Solution Preview

    Please see the below for the complete tutorial.

    According to the Tax Code, given that the Switzerland branch is Beatco's qualified business unit with a functional currency other than the US dollars, Swiss Francs, then the branch's income ...

    Solution Summary

    The solution discusses the U.S. taxation of international transactions and consequences.