Definition of Foreign Base Company Income. Apache, a U.S. corporation, owns 80% of the stock...
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Definition of Foreign Base Company Income. Apache, a U.S. corporation, owns 80% of the stock in Burrito, incorporated in Country Y. Burrito reports the following results for the current year
: Gross Income DeductionsForeign
base company sales income $300,000 $120,000
Foreign base company services income 150,000 90,000
Dividend from Kane, a 70%-owned Country Y corporation 70,000 0
Rental income earned in Country Y 280,000 220,000
Kane conducts substantially all its business in Country Y
. a. What amount of income must Apache recognize as a result of Burritos activities?
b. How would your answer to Part a change if Kane were instead a 70%-owned Country M corporation?
c. How would your answer to Part b change if foreign base company sales income before deductions were instead $500,000?
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