Reference no: EM132664212

Problem - VoiceCo, a domestic corporation, designs, manufactures, and sells specialty microphones for use in theaters. All of its activities take place in Florida, although it ships products to customers all over the United States. When it receives inquiries about its products from potential non-U.S. customers, VoiceCo decides to test the overseas market and places ads in various trade journals that have an international focus. Soon it is taking orders from offshore customers.

VoiceCo is concerned about its potential worldwide income tax exposure. Although it has no assets or employees outside the United States, it now is involved in international commerce. Is VoiceCo subject to income taxes in any other countries? Must it pay U.S. income taxes on the profits from its overseas sales? What if VoiceCo pays taxes to other countries? Does it receive any benefit from these payments on its U.S. tax return?

Later, VoiceCo establishes a manufacturing plant in Ireland to meet the European demand for its products. VoiceCo incorporates the Irish operation as VoiceCo-Ireland, an Irish corporation. Ireland imposes only a 12.5 percent tax on VoiceCo-Ireland's profits. How does U.S. corporate income tax law affect these activities?