Estimating Marginal Tax Rates When Entering
Foreign Markets (Part II) — footnotes

¹⁵ For an explanation of how to calculate the MTR for such profit, see Larkins, Estimating Marginal Rates When Entering Foreign Markets (Part I), 34 The Tax Adviser 560 (September 2004).

¹⁶ Multinationals use Form 8832, Entity Classification Form, to make the election. Unless the IRS consents to an early change, a foreign entitys classification remains the same for five years after filing Form 8832.

¹⁷ This result assumes that no other U.S. persons own equity in the joint venture. If U.S. persons owning at least 10% of the joint venture together own more than 50% (a 10-50 foreign corporation), U.S. residual tax on certain types of income cannot be deferred; in such case, the controlled foreign corporation (CFC) rules apply.

¹⁸ For a detailed discussion of each category, see Larkins, Controlled Foreign Corporations, International Applications of U.S. Income Tax Law: Inbound and Outbound Transactions (John Wiley & Sons, 2004), p. 254277.

¹⁹ See PricewaterhouseCoopers, Corporate Taxes: Worldwide Summaries 20022003 (John Wiley & Sons, 2002) (hereinafter cited as PWC), p. 737.

²⁰ See the Convention Between the Government of the United States of America and the Government of the United Mexican States for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (9/18/92), Article 15.

²¹ Rev. Rul. 93-86, 1993-2 CB 71.

²² The threshold varies by U.S. region, but foreign housing expenses exceeding $13,000 often qualify for some tax benefit.

²³ See PricewaterhouseCoopers, Individual Taxes: Worldwide Summaries 20022003 (John Wiley & Sons, 2002), p. 487.

²⁴ For details, see Nazir, Tax Clinic, Totalization Agreements, 35 The Tax Adviser 544 (September 2004).

²⁵ See PWC, note 19 supra, p. 247.

²⁶ See the Convention Between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital (8/31/94), Article 11.

²⁷ See PWC, note 19 supra, p. 407.

²⁸ See id., p. 141.