Chapter 12 Objectives

1. Define the term nexus and differentiate between physical presence nexus and economic nexus.

2. Apportion corporate taxable income among states with jurisdiction to tax the income using the Uniform Division of Income for Tax Purposes Act (UDITPA) three-factor formula.

3. Explain the significance of a permanent establishment for determining jurisdiction under an income tax treaty.

4. Describe the U.S. global system of taxation as it applies to U.S. firms conducting international business operations.

5. Compute a foreign tax credit.

6. Explain how firms operating in high-tax and low-tax foreign jurisdictions can cross credit to maximize their foreign tax credit.

7. Identify the difference in tax consequences between a foreign branch operation and a foreign subsidiary.

8. Compute a deemed paid foreign tax credit.

9. Explain how corporations can defer U.S. tax on their foreign source income by operating through foreign subsidiaries.

10. Define a controlled foreign corporation (CFC) and explain how subpart F income earned by a CFC is constructively repatriated to the U.S. parent.

11. Describe the role of Section 482 in the international transfer pricing area.