Professor Lathrope

Professor Lathrope

Fall 2017

Room 318

(415) 722-4109

FOREIGN TAX I

(2 units)

Course # Law 502, § 1

Syllabus

COURSE MEETINGS

Class meets on Wednesdays from 6:00 p.m.-8:00 p.m. in Room 454, 101 Howard St.

COURSE DESCRIPTION:

Foreign Tax I is the introductory class in United States international taxation. Coverage includes the jurisdiction of the United States to tax international transactions, the rules for determining the source of income and deductions, U.S. taxation of nonresident aliens and foreign corporations, and the foreign tax credit.

REQUIRED COURSE MATERIALS:

Paragraph references to “Text” in the syllabus are to Gustafson, Peroni & Pugh, Taxation

of International Transactions—Materials, Text and Problems (4th ed., 2011).

Selected Sections-United States International Taxation (2016 Ed., Foundation Press). Sections of the InternalRevenue Code and regulations should be reviewed as they arediscussed in the Text.

LEARNING OUTCOMES

The learning outcomes for the course include: (1) Knowledge and understanding of doctrine, (2) Development of skills in statutory construction, (3) Ability to engage in legal analysis and reasoning, and (4) Efficacy in problem-solving.

EXAMINATION AND GRADING:

Your grade will be based on anonymously graded final examinations. Check on the law school website for the dates of the exams. For the exams, you will be allowed to use the course materials and anything prepared by you (including class notes). A simple calculator may be used. Grading will be on the law school’s scale of A, B, C, D and F with pluses and minuses. I reserve the right to raise or lower your grade one grade (e.g., from a B to a B+ or B-) based on performance in class.

OFFICE HOURS:

Office hours will be held for one hour prior to class on Wednesday nights. Prof. Lathrope can be reached by email to arrange a phone conversation at other times.

HOURS OF WORK PER CLASS

The American Bar Association standards for accrediting law schools contain a formula for calculating the amount of work that constitutes one credit hour. According to ABA Standard 310(b)(1), “a ‘credit hour’ is an amount of work that reasonably approximates: (1) not less than one hour of classroom or direct faculty instruction and two hours of out-of-class student work per week for fifteen weeks, or the equivalent amount of work over a different amount of time.” This is a 2-credit hour class. All told, applying the ABA standard to the number of credits offered for this class, in a full semester class you should plan on spending, on average, a total of6 hours per week on course-related work.

ATTENDANCE POLICY

The School of Law requires students to attend classes regularly, complete

assignments in a timely manner, and be prepared for and participate in class.The law school attendance policy follows the ABA standard that students must attend at least 80% of the scheduled class sessions for any given course in order to receive credit.If a student has exceeded the allowable class absences, she/he may be administratively withdrawn and/or receive a failing grade for the course. For full policy details, please see: Policies 2017.pdf(Sec.XIII)

AMERICANS WITH DISABILITIES ACT ACCOMODATIONS

USF affords all students with disabilities equal access under the law. If you are in need of accommodation under the Americans with Disabilities Act (ADA) or similar enactment, you must contact the University Student Disability Services Office at 415.422.2613 or to obtain the appropriate accommodation.

ACADEMIC DISHONESTY

Defined as engaging in any dishonest conduct in connection with any examination, written work, or other academic activity. The University of San Francisco takes academic dishonesty very seriously. You are responsible for knowing and adhering to the explicit details of our policy as listed here in the Student Honor Code: (pages 4-5)

CHAPTER 1. INTRODUCTION AND OVERVIEW

C.Reach of U.S. Tax Jurisdiction: The Role of International Law

Text: Skim ¶¶1070 – 1080 for background

D.Some Basic Conceptual and Policy Issues

Text: Skim ¶¶1085 – 1135 for background

E.Some Basic Principles of U.S. International Taxation

Code: §§ 2(d), 11(d). See §§ 861(a) & (b); 882(a).

Text: ¶¶1140 - 1165

F.Who Is Taxed on Worldwide Income?

Code: §§ 877, 877A, 6039E, 6039G, 7701(a)(50),

Regs.: §§ 1.1-1(b), (c); 301.7701(b)-1(a), (b)(1), (c), (e), -2(a) through (d), -3(a), (b)(1)-(2), (c), (d), (e)(1), (f). Skim§ 301.7701(b)-4.

Text: ¶¶1170 – 1225

Problems: ¶¶1190 (Problems 2, 4 & 5), 1200, 1230.

G.The Role of Income Tax Treaties in International Taxation

Code: §§ 894(a), 7852(d)

2016 Model Treaty: Skim Arts. 1, 2, 3, 4, 24, 25, 26, 28, 29, & 30

Text: ¶¶1235 - 1295

Problem: ¶1285

CHAPTER 2. SOURCE RULES FOR INCOME AND DEDUCTIONS

A.Introduction: The Relevance of Source Rules

2016 Model Treaty: Art. 23(3)

Text: ¶2000

B.Interest

Code: §§ 861(a)(1); 862(a)(1); 884(f)(1)(A)

Regs.: §§ 1.861-2(a)(1)-(3)

Text: ¶2005

Problems: ¶2215 (Problem 1)

C.Dividends

Code: §§ 861(a)(2)(A), (B); 861(c); 862(a)(2)

Text: ¶2210

Problems: ¶2215 (Problem 2)

D.Rentals and Royalties

Code: §§ 861(a)(4); 862(a)(4)

Text: ¶¶2015 - 2021

Problems: ¶2215 (Problems 4 & 5)

E.Compensation for Personal Services

Code: §§ 861(a)(3); 862(a)(3)

Regs: § 1.861-4(b)

Text: ¶¶2025 - 2100

Problems: ¶2215 (Problem 3)

F.Sale of Real Property

Code: §§ 861(a)(5); 862(a)(5)

Text: ¶2105

G.Sale of Personal Property

Code: §§ 861(a)(6); 862(a)(6); 863(b)(2); 865 (skip 865(h))

Regs: § 1.861-7(c); 1.863-3(a), -3(b)(1); Skim § 1.863-3(b)(2), -3(b)(3), - 3(c)

Text: ¶¶2110 – 2175

Problems: ¶2215 (Problems 6, 12, 9, 7, 8, 10, 13 & 14 - the problems will be discussed in this order)

H.Special Rules

Code: Skim § 861(a)(8). Note §§ 863(c), (d), (e)

Regs: Skim § 1.863-1(d)(1), (2)

Text: ¶¶2180 - 2211

Problems: ¶2215 (Problem 11)

I.Source Rules for Deductions

Code: §§ 861(b); 862(b); 863(a); 864(e), (f).

Text: ¶¶2220 - 2240

Problems: ¶ 2235

J.Reflection on Source Rules

Text: ¶2245

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CHAPTER 3.FOREIGN PERSONS: U.S. TRADE OR BUSINESS INCOME

A.Introduction

Code: §§ 871(b); 882(a)

Text: ¶3000

B.U.S. Trade or Business

Code: §§ 864(b); 864(c)(5); 875; 871(d)(1); 882(d)

Text: ¶¶3005 - 3095

C.Determining Amount to be Taxed

Code: §§ 864(c); 865(e)(2); 873; 874(a); 882(b), (c); 864(e)(2)

Regs: § 1.864-6(b)(3)(i). Skim § 1.864-4(c)(1)-(4)

Text: ¶¶3100, 3110-3120, 3135-3140, 3150

Problems: ¶3155

D.Effects of Treaty Provisions

2016 Model Treat: Arts. 5, 7, 14, & 16(1)

Text: ¶¶3160 - 3185, 3190 - 3220

Problems: ¶3225 (Problems 1, 2, 3 & 4)

E.Branch Profits Tax

Code: §§ 884(a) – (c). Skim remaining subsections of § 884

2016 Model Treaty: Art. 10 (para. 10) & Art. 24(6)

Text: ¶3230

Problems: ¶3235

F.Exceptions Based Upon Foreign Policy Considerations

Text: ¶3240

CHAPTER 4. FOREIGN PERSONS: NONBUSINESS U.S. - SOURCE INCOME

A.Basic Mechanism

Code: §§ 871(a)(1); 881(a)

Text: ¶¶4000 - 4005

B.What is FDAP Income?

Regs: § 1.1441-2(b)(1)(ii)

Text: ¶¶4010 - 4025

C.Untaxed Items of U.S. – Source FDAP Income

Code: §§ 871(i); 881(d); 871(h); 881(c) (skip 881(c)(5)); 871(j)

Text: ¶¶4030 - 4047

D.Effects of Treaties on Withholding Taxes

Text: ¶¶4050 – 4102

E.Gains From Sale of Property Not Effectively Connected With U.S. Trade or Business

Code: Skim § 871(a)(2)

Regs: § 1.1441-2(b)(2)(i)

Text: ¶¶4110 - 4115

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F.Withholding Mechanism

Code: §§ 1441(a), (b), (c)(1), (c)(9)-(11); 1442(a), (b); 1461. Skim §§ 1446; 1471-1473.

Text: ¶¶4120-4125, 4155-4182

Problems: ¶ 4280 Problems 1-8, 11

G.Treatment of Gains from U.S. Real Property

Code: §§ 897(a)(1), (b), (c); 1445(a), (b).

Text: ¶¶4185 – 4260

Problems: ¶ 4280 Problems 12-16

H.Financing the U.S. Enterprise

Text: ¶¶4265 – 4270

I.Tax Planning Considerations for Inbound Transactions

Text: ¶4275

K.Some Reflections on the Taxation of Foreign Persons

Text: ¶¶4290 - 4295

CHAPTER 5. INTRODUCTION TO OUTBOUND TAXATION; THE FOREIGN TAX CREDIT AND OTHER METHODS FOR MITIGATING THE DOUBLE TAXATION OF U.S. PERSONS

B.The Foreign Tax Credit: Overview

Code: §§ 901(a)-(c); 164(a)(3). Skim 902; 903; 904, 909

Text: ¶ 5005

C.Taxpayers That May Use Foreign Tax Credits

Text: ¶¶5010 (pp. 308-top of 310)

D.Creditable Payments (Sections 901 and 903)

Code: Skim § 901(j)

Reg.: §§ 1.901-2(a), (b)(1)-(4)(i), (b)(4)(iv) Example 1, (c)(1), (d)(1), (e)(5)(i); 1.903-1(a), (b)(1)-(2)

Text: ¶¶5015 - 5025, 5050, 5060-5110, 5125

Problems: ¶5130 (Problems 1 – 4, 14, 15)

E.Election and Accounting Rules for Foreign Tax Credits

Text: ¶ 5133

F.Indirect Credit (Section 902)

Code: §§ 902(a), (b) & (c)(7); 78. Skim §§ 902(c)

Text: ¶¶5135 – 5150

Assume X Co. (a U.S corporation) owns 100% of F Co., a newly formed foreign subsidiary. During the current year, F Co. has $500,000 of taxable income, pays a 20% foreign income tax, and distributes a $50,000 dividend to X Co. What are the results to X Co.?

Problems: ¶¶ 5140 (Problems 1-3), 5180 (Problem 1)

G.Tax-Sparing Credits

Text: ¶ 5210

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H.Introduction to Foreign Tax Credit Limitations

Code: §§ 904(a), (c), (d)(1), (j). Skim §§ 904(b), (d)(2)-(5)

Text: ¶¶5215 – 5275 (skim ¶¶ 5245-5253)

Problems: ¶¶5260, 5280 (Problems 1-4)

J.Tax Exemption for Certain U.S. Taxpayers Living Abroad (Section 911)

Text: ¶5325 - 5335, 5350-5355, 5365-5370

K.The Role of Tax Treaties in Mitigating the Double Taxation of U.S. Persons

Text: ¶¶5380 - 5390

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