Discussion:Foreign corp, effectively connected income and deductions
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Discussion Forum Index --> Advanced Tax Questions --> Foreign corp, effectively connected income and deductions
Discussion Forum Index --> Tax Questions --> Foreign corp, effectively connected income and deductions
Kareneemery (talk|edits) said: | 11 March 2008 |
| I think I'm over my head! I'm working on an 1120-F for a UK corp. This corp has an EIN in its UK name and authority to operate in NC, but it's a foreign corporation (rather than a US subsidiary). They're running clinical trials hoping for FDA approval of their product. They have no income from these trials, but they do have an office in the US and they have payroll expenses. Their cash flow is wired from the UK and since this is not a separate entity from the UK corp, I have not considered that to be revenue. Here's my concern: If they don't have any income connected to the trials in the US, am I able to claim the operating expenses in the US as a deduction? I was thinking that I could carry forward the NOL in the event of future income from the product, but the more I read, the more confused I'm becoming. Maybe what I should be doing instead is filing a protective return, since there is no gross income arising from the US operations? But that won't allow me to use these current losses against future income, right?
Help! I know this is not a common tax area, but I think that's why I'm having such a hard time figuring it out and finding reference materials that make sense to me. Anyone with foreign corp expertise? | |
| 11 March 2008 | |
| They qualify for research credit in the UK on their UK tax return. I don't know US research tax credit rules. Sounds like you're way over your head, based on your other posts.
Why is their UK accountant not working jointly with you to help you through this? Why not hire another accountant to step you through this or even just outsource to him/her? | |
Kareneemery (talk|edits) said: | 11 March 2008 |
| I'm the bookkeeper for their US operations, so it seemed natural to handle this, too. I knew that once they had revenue generating from this business activity, I would want to farm out the tax return, but at the moment, there is no revenue related to the US operations, either in the US or the UK. I really thought that I was just storing up losses until that they had FDA approval and began to market the item.
In terms of research credit, the US books don't have any cost for that. They only have the cost of running the office here, including payroll. The UK even pays the trial sites directly. | |
