Research Problem 1. Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you regarding a potential restructuring of business operations. Boots has long manufactured its western boots in plants in Texas and Oklahoma. Recently, Boots has explored the possibility of setting up a manufacturing subsidiary in Ireland, where manufacturing profits are taxed at 12.5%. Jerry Jeff sees this as a great idea, given that the alternative is to continue all manufacturing in the United States, where profits are taxed at 21%. Boots plans to continue all of the cutting, sizing, and hand tooling of leather in its U.S. plants. This material will be shipped to Ireland for final assembly, with the finished product shipped to retail outlets all over Europe and Asia. Your initial concern is whether the income generated by the Irish subsidiary will be considered foreign base company income. Address this issue in a research memo, along with any planning suggestions.

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter25: Taxation Of International Transactions
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Research Problem 1. Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you
regarding a potential restructuring of business operations. Boots has long manufactured its western boots
in plants in Texas and Oklahoma. Recently, Boots has explored the possibility of setting up a manufacturing
subsidiary in Ireland, where manufacturing profits are taxed at 12.5%. Jerry Jeff sees this as a great idea,
given that the alternative is to continue all manufacturing in the United States, where profits are taxed at
21%.
Boots plans to continue all of the cutting, sizing, and hand tooling of leather in its U.S. plants. This material
will be shipped to Ireland for final assembly, with the finished product shipped to retail outlets all over
Europe and Asia.
Your initial concern is whether the income generated by the Irish subsidiary will be considered foreign base
company income. Address this issue in a research memo, along with any planning suggestions.
Transcribed Image Text:Research Problem 1. Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you regarding a potential restructuring of business operations. Boots has long manufactured its western boots in plants in Texas and Oklahoma. Recently, Boots has explored the possibility of setting up a manufacturing subsidiary in Ireland, where manufacturing profits are taxed at 12.5%. Jerry Jeff sees this as a great idea, given that the alternative is to continue all manufacturing in the United States, where profits are taxed at 21%. Boots plans to continue all of the cutting, sizing, and hand tooling of leather in its U.S. plants. This material will be shipped to Ireland for final assembly, with the finished product shipped to retail outlets all over Europe and Asia. Your initial concern is whether the income generated by the Irish subsidiary will be considered foreign base company income. Address this issue in a research memo, along with any planning suggestions.
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