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Exam 9: Taxation of International Transactions

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Question 51

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Which of the following is not a foreign person?

A) Foreign corporation 51% owned by U.S. shareholders.
B) Foreign corporation 100% owned by a domestic corporation.
C) Citizen of Germany with U.S. permanent resident status (i.e., green card) .
D) Citizen of Italy who spends 14 days vacationing in the United States.

E) A) and D)
F) A) and C)

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Question 52

Multiple Choice

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Liang, an NRA, is sent to the United States by Fuller Corporation, her foreign employer. She spends 50 days in the United States and earns $20,000 for a two-month period. This amount is attributable to 40 U.S. working days and 10 non-U.S. working days. Her employer does not have a U.S. trade or business and Liang spends no other time in the U.S. for the tax year. Liang's U.S.-source taxable income is:

A) $20,000.
B) $16,000.
C) $3,000.
D) $0.

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

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Question 53

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An appropriate transfer price is one that considers the risks, assets, and functions of the persons to whom income is assigned.

Which of the following statements is false in regard to the U.S. income tax treaty program?

U.S. income tax treaties typically:

Which of the following transactions by a U.S. corporation may result in taxation under § 367?

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

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 regarding the U.S. taxation of non-U.S. persons is true?

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the U.S. other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

Krebs, Inc., a U.S. corporation, operates an unincorporated branch manufacturing operation in the U.K. Krebs, Inc., reports $900,000 of taxable income from the U.K. branch on its U.S. tax return, along with $1,600,000 of taxable income from its U.S. operations. The U.K. branch income is all general limitation basket income. Krebs paid $270,000 in U.K. income taxes related to the $900,000 in branch income. Assuming a U.S. tax rate of 35%, what is Krebs' U.S. tax liability after any allowable foreign tax credits?

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

"Inbound" and "offshore" asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Fulton, Ltd., a foreign corporation, operates a U.S. branch that reports effectively connected U.S. earnings and profits (after income taxes) of $800,000 for the tax year. The branch's U.S. net equity at the beginning of the tax year is $2 million and at the end of the tax year is $1.5 million. Fulton is organized in a nontreaty country. Fulton's dividend equivalent amount for the year is:

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.-source?

Serena, a nonresident alien, is employed by GlobalCo, a foreign corporation. Serena works in the United States for 3 days during the year, receiving a gross salary of $2,500 for this period. GlobalCo is not engaged in a U.S. trade or business. Under the "commercial traveler" exception, the $2,500 is not classified as U.S.-source income.

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Generally, accrued foreign income taxes are translated at the:

Yvonne is a citizen of France and does not have permanent resident status in the United States. During the last three years she has spent a number of days in the United States. Current year - 150 days First prior year - 150 days Second prior year - 90 days Is Yvonne treated as a U.S. resident for the current year?