Please check the attached file, thank you very much!
Iron Mill US is a US corporation for US federal
tax purposes. It is wholly
owned by Iron Mill China.
Iron Mill US is a US car
manufacturer located in Michigan.
Iron Mill US also
directly wholly owns Iron Mill Singapore, which in turn directly wholly owns
Iron Mill Canada, and Iron Mill Cayman Islands. All these entities are
corporations for U.S. tax purposes.
In tax year 2019, the Iron Mill group transaction flows are as follow:
Iron Mill Canada operates
a Canadian plant in Canada. It imports the rubber from Southeast Asia and
manufacture the tire and sell it to Iron Mill US.
Iron Mill US sold the non-US IP rights to Iron Mill Cayman Islands in 2005. Iron Mill Cayman
Islands collects royalty
payment from Iron Mill Canada.
Iron Mill Singapore helps Iron Mill US to market their
products. Therefore, Iron Mill US will make services
payments to Iron Mill Singapore each year. All these services were performed
within Singapore. In addition, Iron Mill Singapore would
be the wholesaler for Iron Mill US. It buys the final
products from Iron Mill US and sells to its APAC
customer. None of its customers are in Singapore.
Iron Mill US
borrowed $1 billion
USD from Iron Mill China. In tax year 2019,
it made $100 million interest payment to Iron Mill China.
Lastly, Iron Mill US was established in 1990, and it had more than $1 billion
gross profit each year up to 2018 (i.e., Gross receipts- COGS) since its
The financials for each of the entities for tax year 2019 (all under USD) were as follows:
The balance sheet for each of the entities for tax year 2019 (all under USD) were as follows. Please note that the balance sheet below is book value only and it did not consider the basis impact under Subpart F / GILTI inclusion. In addition, none of the CFCs has any historical PTEP up to 12.31.2018. At the end of tax year 2019, Iron Mill US has
$1,000,000,000 accumulated E&P.
In addition, Bob, the global VP of tax of Iron Mill China, mentioned
that due to the business
needs and pandemic, Iron Mill
Singapore distributed USD $100,000,000 cash to Iron Mill US in tax year 2019.
He mentioned that Iron Mill Singapore did not withhold any dividend withholding
Tax Year 2020
Bob is not happy with the current
global effective tax rate for Iron Mill Group. Therefore, he engages your boss,
Heisenberg to help him to minimize
the U.S. tax liability, especially the Subpart F inclusions.
addition, Iron Mill US intends
to distribute $500,000,000 to Iron Mill China. No dividend has been
declared yet, but Bob is asking Heisenberg to advise him whether there are any
You are a tax manager
who will assist
Heisenberg with respect to the engagement. Heisenberg would like
you to analyze the following:
is the Iron Mill US’s U.S. tax liability for tax year 2019 (including the
foreign tax credit limitation analysis)?
2. Do you have any suggestions (e.g.,
change the legal structure and/or intercompany transaction flows) to minimize
the Subpart F inclusion for Iron Mill US? If your proposal involves any
internal restructuring transactions, please do not worry about the tax implications
with respect to mergers & acquisitions (i.e., Section 367, 368, 354, 355
etc.) for the internal restructuring transactions. Heisenberg will reach out to
the M&A team for that piece. In addition, Bob also opens to re-arrange the
intercompany transaction flows if it will help to reduce the Subpart F
inclusion. However, due to regulatory concerns, he does not want Iron Mill US
to make sales to its non-US customers.
are the tax implications with respect to the repatriation from Iron Mill US to
Iron Mill China? In addition, what are the tax implications with respect to the
repatriation from Iron Mill Singapore to Iron Mill US?
4. During a phone call, Bob told
Heisenberg that maybe Iron Mill Singapore can elect to be treated as a
Singapore disregarded entity for U.S. tax purposes in order to minimize U.S.
subpart F inclusions for Iron Mill US. Please provide analysis regarding Bob’s
Deliverable: The deliverable will be a tax memorandum addressing all the questions mentioned
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