partial list ofresearch aids :§ 954 B u s i n e s s F i n a n c e

Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you regarding a potential restructuring of business operations. Boots has long manufactured its western boots in plants in Texas and Oklahoma. Recently, Boots has explored the possibility of setting up a manufacturing subsidiary in Ireland, where manufacturing profits are taxed at 12.5%. Jerry Jeff sees this as a great idea, given that the alternative is to continue all manufacturing in the United States, where profits are taxed at 21%.

Boots plans to continue all of the cutting, sizing, and hand tooling of leather in its U.S. plants. This material will be shipped to Ireland for final assembly, with the finished product shipped to retail outlets all over Europe and Asia.

Your initial concern is whether the income generated by the Irish subsidiary will be considered foreign base company income. Address this issue in a research memo, along with any planning suggestions.

Partial list ofresearch aids:

§ 954(d).

Reg. § 1.954–3(a).

Bausch & Lomb, 71 TCM 2031, T.C.Memo. 1996–57.

Your responsibility:

Prepare a tax research memo addressing the question that has been raised. Please note that if the tax memo is not in the required format and/or contains very little analysis you will receive a zero (0) for the assignment. All good faith efforts are capable of receiving a minimum of 60% but less than a good faith effort will be awarded zero points.

You will need to support your conclusion using primary sources of tax law. Your textbook is NOT primary authority nor are IRS Publications

You must use proper citation form in your memo (see Chapter 2 for help with citation form). The form for this communication should be professional and in the form of a tax research memo (example posted on Blackboard and a similar example in your textbook). Do yourself a favor and look at the grading rubric before you submit.

This memo should be whatever length you feel is appropriate to resolve the issues. We do NOT use a bibliography or list of references in a tax research memo. You will see that citations are within the text of the document in the example. Once a court case has been cited in full, it can be referred to using simply the name in italics.