FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 25: Taxation of International Transactions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

True/False

Review LaterAdd Note

Review Later

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S. multinational business.

A) True
B) False

Correct Answer

verified

Show Answer

Question 62

Essay

Review LaterAdd Note

Review Later

Present, Inc., a U.S. corporation, owns 60% of the stock of Past, Inc., a foreign corporation. For the current year, Present receives a dividend of $80,000 from Past. Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000, respectively. What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

Correct Answer

verified

Dividend income is "grossed up...

View Answer

Show Answer

Question 63

True/False

Review LaterAdd Note

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $800,000 (the 35% marginal tax rate applies). Jaime's current year FTC is $87,500.

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

During Year 4, Josita, an NRA, receives interest income of $50,000 from Talmadge, Inc., an unrelated U.S. corporation. Considering the following facts related to Talmadge's operations, what is the source of the interest income received by Josita? $\begin{array}{cccc} \text { Year } &\text { U.S.-source } & \text { Active foreign } & \text { Total gross } \\&\text { income } & \text { business income } & \text { income }\\ \text { Year } 1 & \$ 200,000 & \$ 500,000 & \$ 700,000 \\ \text { Year } 2 & 50,000 & 950,000 & 1,000,000 \\ \text { Year } 3 & 100,000 & 900,000 & 1,000,000 \\ \text {Totals} & \$ 350,000 & \$ 2,350,000 & \$ 2,700,00 \\\\\text { Year } 4 & \$ 150.000 & \$ 950.000 & \$ 100.000\end{array}$

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

Kilps, a U.S. corporation, receives a $200,000 dividend from a 20% owned foreign corporation. The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000. Kilps's U.S. tax liability before the FTC is $350,000, the gross dividend income is $240,000, and Kilps's worldwide taxable income is $1 million. Kilps's foreign tax credit for the taxable year is:

Wood, a U.S. corporation, owns 30% of Hout, a foreign corporation. The remaining 70% of Hout is owned by other foreign corporations not controlled by Wood. Hout's functional currency is the euro. Wood receives a 50,000€ distribution from Hout. If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1, the exchange rate at year end is .95€: $1, and on the date of the dividend payment the exchange rate is 1.1€: $1, what is Wood's tax result from the distribution?

Match the definition with the correct term. -A business operation that accounts for profits and losses using its functional currency.

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S. parent, followed by:

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the source of AirCo's inventory sales income?

Britta, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes as follows. $\begin{array}{lcc} & \text { Income } & \text { Taxes } \\\text { Passive category } & \$ 200,000 & \$ 10,000 \\\text { General limitation category } & 800,000 & 350,000\end{array}$ Britta's worldwide taxable income is $1,600,000 and U.S. taxes before FTC are $560,000 (assume a 35% tax rate). What is Britta's U.S. tax liability after the FTC?

SilverCo, a U.S. corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation. SilverCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the United States. What gain or loss, if any, is recognized as a result of this transaction?

Unused foreign tax credits are carried back two years and then forward 20 years.

RainCo, a U.S. corporation, owns a number of patents related to designing umbrellas. RainCo licenses these patents to unrelated parties. TexCo, a domestic corporation, paid RainCo $100,000 in royalties related to these licenses. TexCo uses the patent information in its manufacturing process in its Canadian plant. IrishCo, an Irish corporation, paid RainCo $25,000 in royalties related to the licenses. IrishCo uses the patent information in its manufacturing process in its Michigan manufacturing plant. How much U.S.-source royalty income did RainCo earn from these licenses?

Which of the following statements best describes the purpose of § 482, under which the Treasury can reallocate Income and deductions among related taxpayers?

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

USCo, a U.S. corporation, reports worldwide taxable income of $500,000, including a $100,000 dividend from ForCo, a wholly­owned foreign corporation. ForCo's undistributed earnings and profits are $1 million and it has paid $200,000 of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?