federal income tax otherwise imposed on such
foreign-source income. To that end, the source-of-income rules of sections 861 through 865 determine the sources of gross income for U.S.
The finance minister in his speech has explained that such restriction had created difficulties for overseas or non-resident Pakistanis, as they were not required to file tax return for their
foreign-source income but were restricted from buying property or motor vehicle in Pakistan.
Therefore, persons eligible to file declaration under the Act may include, both Pakistan-source and
foreign-source income, it added.
Under both systems, US-source income of multinational corporations is meant to be taxed at the US rate applied to domestic corporate income, and
foreign-source income of foreign-resident corporations is outside thejurisdiction of the US tax law.
Additional Benefits That Justify Tax on
Foreign-Source Income 2183 4.
Choosing a tax structure that allows
foreign-source income to be deferred from U.S.
tax liability imposed on
foreign-source income, subject to certain limitations.
The discussion draft would provide a 95 percent dividends-received deduction for dividends paid out of the
foreign-source income. This deduction would apply to a controlled foreign corporation (CFC) of a U.S.
However, the study countries tax other types of
foreign-source income such as royalties.
corporations computed a separate foreign tax credit for a defined group of statutory categories of
foreign-source income or "baskets" (each of these is described separately in the Explanation of Selected Terms section).
resident selling personal property would generate U.S.-source income from the sale of personal property, and a nonresident would generate
foreign-source income.
When a firm is deficit credit, it pays tax at the rate [[tau].sub.US] regardless of the amount of FTCs applied to
foreign-source income, so reducing allowable FTCs via interest allocation does not affect the current-year tax liability or tax incentives to use domestic debt.