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Alka Company, a domestic company, is a global manufacturer of snack food products and soft drink3. of Alka's operations are in the U.S. and it sells products only in the U.S. Its foreign operations are conducted through its two, 100 % owned subsidiaries, Maxi and Mini. Maxi is incorporated in France. Its manufacturing operations are all in France and its products are distributed for sale throughout Europe. Mini is incorporated in Argentina which is where all of its assets are located. Mini distributes its products for sale throughout Latin America. Information relative to Alpha, Maxi, and Mini for 2019 is as follows: Income calculated under U.S. tax principles U.S. Asset Bases non US taxes paid Alka $12,000,000 $7,000,000 Maxi 7,000,000 3,000,000 $1,500,000 Mini 2,000,000 1,000,000 200,000 Maxi and Mini distributed no dividends in 2019 and had no subpart F income. Alka also received $200,000 of interest from a German bank in 2019 whereby the bank withheld German taxes of $20,000. Alka's U.S. tax rate is 21%. Required: 1. Calculate Alka's U.S. tax after the foreign tax credit. 2. The legislature of Argentina is looking to replace its income tax with a gross receipts tax. The income tax rate is 20% and the gross receipts tax rate would be set at 5% of gross receipts from sales of goods and services made in Argentina, similar to a sales tax. The legislature believes this "flat" tax will be easier to administer and will increase government revenues. You are a U.S. tax advisor for Alka. Please explain any U.S. tax consequences associated with this proposal.

Alka Company, a domestic company, is a global manufacturer of snack food products and soft drink3. of Alka's operations are in the U.S. and it sells products only in the U.S. Its foreign operations are conducted through its two, 100 % owned subsidiaries, Maxi and Mini. Maxi is incorporated in France. Its manufacturing operations are all in France and its products are distributed for sale throughout Europe. Mini is incorporated in Argentina which is where all of its assets are located. Mini distributes its products for sale throughout Latin America. Information relative to Alpha, Maxi, and Mini for 2019 is as follows: Income calculated under U.S. tax principles U.S. Asset Bases non US taxes paid Alka $12,000,000 $7,000,000 Maxi 7,000,000 3,000,000 $1,500,000 Mini 2,000,000 1,000,000 200,000 Maxi and Mini distributed no dividends in 2019 and had no subpart F income. Alka also received $200,000 of interest from a German bank in 2019 whereby the bank withheld German taxes of $20,000. Alka's U.S. tax rate is 21%. Required: 1. Calculate Alka's U.S. tax after the foreign tax credit. 2. The legislature of Argentina is looking to replace its income tax with a gross receipts tax. The income tax rate is 20% and the gross receipts tax rate would be set at 5% of gross receipts from sales of goods and services made in Argentina, similar to a sales tax. The legislature believes this "flat" tax will be easier to administer and will increase government revenues. You are a U.S. tax advisor for Alka. Please explain any U.S. tax consequences associated with this proposal.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alka Company, a domestic company, is a global manufacturer of snack food products and soft drinks. All of Alka's operations are in the U.S. and it sells products only in the U.S. Its foreign operations are conducted through its two, 100% owned subsidiaries, Maxi and Mini. Maxi is incorporated in France. Its manufacturing operations are all in France and its products are distributed for sale throughout Europe. Mini is incorporated in Argentina which is where all of its assets are located. Mini distributes its products for sale throughout Latin America. Information relative to Alpha, Maxi, and Mini for 2019 is as follows: Income calculated under U.S. tax principles U.S. Asset Bases non US taxes paid Alka $12,000,000 $7,000,000 Maxi 7,000,000 3,000,000 $1,500,000 Mini 2,000,000 1,000,000 200,000 Maxi and Mini distributed no dividends in 2019 and had no subpart F income. Alka also received $200,000 of interest from a German bank in 2019 whereby the bank withheld German taxes of $20,000. Alka's U.S. tax rate is 21%. Required: 1. Calculate Alka's U.S. tax after the foreign tax credit. 2. The legislature of Argentina is looking to replace its income tax with a gross receipts tax. The income tax rate is 20% and the gross receipts tax rate would be set at 5% of gross receipts from sales of goods and services made in Argentina, similar to a sales tax. The legislature believes this "flat" tax wilI be easier to administer and will increase government revenues. You are a U.S. tax advisor for Alka. Please explain any U.S. tax consequences associated with this proposal.
Transcribed Image Text:Alka Company, a domestic company, is a global manufacturer of snack food products and soft drinks. All of Alka's operations are in the U.S. and it sells products only in the U.S. Its foreign operations are conducted through its two, 100% owned subsidiaries, Maxi and Mini. Maxi is incorporated in France. Its manufacturing operations are all in France and its products are distributed for sale throughout Europe. Mini is incorporated in Argentina which is where all of its assets are located. Mini distributes its products for sale throughout Latin America. Information relative to Alpha, Maxi, and Mini for 2019 is as follows: Income calculated under U.S. tax principles U.S. Asset Bases non US taxes paid Alka $12,000,000 $7,000,000 Maxi 7,000,000 3,000,000 $1,500,000 Mini 2,000,000 1,000,000 200,000 Maxi and Mini distributed no dividends in 2019 and had no subpart F income. Alka also received $200,000 of interest from a German bank in 2019 whereby the bank withheld German taxes of $20,000. Alka's U.S. tax rate is 21%. Required: 1. Calculate Alka's U.S. tax after the foreign tax credit. 2. The legislature of Argentina is looking to replace its income tax with a gross receipts tax. The income tax rate is 20% and the gross receipts tax rate would be set at 5% of gross receipts from sales of goods and services made in Argentina, similar to a sales tax. The legislature believes this "flat" tax wilI be easier to administer and will increase government revenues. You are a U.S. tax advisor for Alka. Please explain any U.S. tax consequences associated with this proposal.
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