Miles,Ltd.,a foreign corporation,has a U.S.branch that earns effectively connected earnings and profits (after income taxes)of $600,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $2 million and at the end of the tax year is $2,800,000.Miles is in a nontreaty country.Miles' branch profits tax for the year is:

Question

Quizplus · Accepted Answer

The branch profits tax is equal to 30% of the branch's dividend equivalent amount (DEA).The DEA is effectively connected E & P (after income taxes)plus a decrease in U.S.net equity for the tax year,or minus an increase in U.S.net equity for the tax year.The branch had an increase in U.S.net equity of $800,000 ($2,800,000 - $2,000,000),resulting in a DEA of $0,i.e.,$600,000 - $800,000.The resulting BPT is $0.

Miles,Ltd,A Foreign Corporation,has a U