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Exam 13: Multijurisdictional Taxation

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Question 71

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Waldo,Inc.,a U.S.corporation,owns 100% of Orion,Ltd.,a foreign corporation.Orion earns only general basket income.During the current year,Orion paid Waldo a $5,000 dividend.The foreign tax credit associated with this dividend is $3,000.The foreign jurisdiction requires a withholding tax of 10%,so Waldo received only $4,500 in cash as a result of the dividend.What is Waldo's total U.S.gross income reported as a result of the $4,500 cash received?

A) $8,000.
B) $5,000.
C) $4,500.
D) $3,000.

E) C) and D)
F) None of the above

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Question 72

Multiple Choice

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Without the foreign tax credit,double taxation would result when:

A) The United States taxes the U.S.-source income of a U.S.resident.
B) A foreign country taxes the foreign-source income of a nonresident alien.
C) The United States and a foreign country both tax the foreign-source income of a U.S.resident.
D) Terms of a tax treaty assign income taxing rights to the U.S.

E) A) and B)
F) A) and C)

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Question 73

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ForCo,a subsidiary of a U.S.corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

In most states,a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact,and allocated according to the location of property owned or used.

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?

Which of the following statements regarding the sourcing of gross income is true?

Politicians frequently use tax credits and exemptions to create economic development incentives.

Winnie,Inc.,a U.S.corporation,receives a dividend of $400,000 from a non-CFC foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Winnie elects the FTC,its gross income attributable to this dividend is $400,000.

Ting,a regional sales manager,works from her office in State W.Her region includes several states,as indicated in the sales report below.Determine how much of Ting's $300,000 compensation is assigned to the payroll factor of State W. $\begin{array}{lcc}\textbf{State}&\textbf{Sales Genlerated}&\textbf{Ting's Time Spent There}\\\mathrm{U} & \$ 1,000,000 & 15 \% \\\mathrm{V} & 5,000,000 & 55 \% \\\mathrm{W} & \underline{4,000,000} & \underline{30 \%}\\&\$10,000,000&100\%\end{array}$