Trace, Ltd., a foreign corporation, operates a trade or business in the United S

Question

Trace, Ltd., a foreign corporation, operates a trade or business in the United States. Trace’s U.S.-source income effectively connected with this trade or business is $800,000 for the current year. Trace’s current-year E & P is $600,000. Trace’s net U.S. equity was $8.2 million at the beginning of the year and $8.6 million at year-end. Trace is a resident in a country that has no income tax treaty with the United States.

report Trace’s branch profits tax liability for the current year, along with at least one planning idea for reducing the branch profits tax.

Explanation / Answer

at current tax rate $200000 profit will be taxed in US as there is no tax treaty.

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