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.
Prepare a letter to Tanner Martin, Trace’s Tax VP, reporting Trace’s branch profits tax liability for the current year, along with at least one planning idea for reducing the branch profits tax. Trace uses the following address for its U.S. affairs: 9148 Church Street, Marietta GA 30060.