B.4 Presentation of the Effects of Cross-Border Tax Laws
The examples below illustrate acceptable approaches for presenting
the effects of cross-border tax laws under the ASU.
Example B-1
Entity A is a U.S. parent entity. Entity A
has no income or loss on a stand-alone basis, no FTC
limitation, and consolidates Entity B for financial
reporting purposes. Entity B is a foreign subsidiary
(operating in Jurisdiction Y). Entity B generated pretax
income of $1,000 and has no permanent or temporary
differences in Jurisdiction Y. Jurisdiction Y has a tax rate
of 10 percent. All of B’s income results in a Subpart F
inclusion for A.
Approach 1 (Subpart
F/FTC Gross Presentation)
Approach 2 (Subpart
F/FTC Net Presentation)
We note that if B is a disregarded entity, presentation of
the rate reconciliation is expected to be substantially
similar to the example above.
Example B-2
Assume the same facts as Example B-1, except that
instead of Entity B’s income resulting in a Subpart F
inclusion for Entity A, its income results in a GILTI
inclusion for A, subject to a 50 percent deduction.
Approach 1 (GILTI/FTC
Gross Presentation)
Approach 2 (GILTI/FTC
Net Presentation)