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Sample cover letter for Internship position at informatica
analyst
1. For each of the following, determine the entity classification (corporation, partnership, or disregarded entity) for US tax purposes, and state whether the entity will be subject to US tax on its worldwide income or only on its income from US sources.
a. ABC Corporation which was formed under California law but 100% of which is owned by citizens and residents of Germany.
ABC is a corporation, § 7701(a)(3) and Treas. Reg. § 301.7701-2(b)(1). It is organized under the laws of a US state. Thus, under § 7701(a)(4) it is a domestic corporation, and subject to tax on its worldwide income. See also Treas. Reg. § 301.7701-5.
b. A Public Limited Company formed in Singapore, but 100% of which is owned by citizens and residents of the US, with and without all available elections.
A Public Limited Company organized in Singapore is a per se corporation, Treas. Reg. § 301.7701-2(b)(8)(i). It is a foreign corporation, and, therefore, is generally subject to tax only on its US source income. No elections are available.
c. A Gesellschaft mit beschrankter Haftung (GmbH) formed in Germany, as a wholly owned subsidiary of a US corporation, with and without all available elections.
A German GmbH is not a per se corporation. Therefore, it is an “eligible entity” and can elect its classification. It has one owner, so it can elect to be a corporation or a disregarded entity. If it does not elect, the default classification rules will apply. Treas. Reg. § 301.7701-3(b)(2) provides that a foreign eligible entity defaults to a corporation if all of its members have limited liability. Treas. Reg. § 301.7701-2(b)(2)(ii) defines “limited liability” to mean that a member has no personal liability for the debts of or claims against the entity by reason of being a member.
Under German law, the members of a GmbH have limited liability. (A GmbH is roughly equivalent to a US LLC.) Therefore, the GmbH will be treated as a corporation unless it elects otherwise. As a foreign corporation, it will be subject to tax only on its US source income. If it elected to be disregarded, it would not be directly subject to US tax, but its US parent company would be subject to tax on the GmbH’s worldwide income since it will be treated as a foreign branch of the US parent
