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Exam 25: Taxation of International Transactions

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Question 61

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Jilt,a non-U.S.corporation,not resident in a treaty country,operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year.The branch increases its investments in U.S.property (its U.S.net equity) by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

A) $720,000.
B) $1,200,000.
C) $2,153,846.
D) $2,873,846.

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

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Question 62

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Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

A) Intangibles income.
B) Passive income.
C) Business income.
D) None of the above are separate FTC limitation baskets.
E) All of the above are separate FTC limitation baskets.

F) A) and B)
G) B) and E)

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Question 63

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Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Foreign taxpayers earning income inside the United States.

USCo,a U.S.corporation,reports worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million 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) ?

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:

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

An advance pricing agreement (APA) is used between:

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.

Dividends received from a domestic corporation are totally U.S.source:

Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

ForCo,a non-U.S.corporation based in Aldonza,purchases widgets from USCo,Inc. ,its U.S.parent corporation.The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza.The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Flapp Corporation,a U.S.corporation,conducts all of its transactions in the U.S.dollar.It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can.The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can.What is Flapp's exchange gain or loss on this sale?

Given the following information,determine whether Greta,an alien,is a U.S.resident for Year 3.Greta cannot establish a tax home in or a closer connection to a foreign country. Year Number of days in the United States 3 120 2 150 1 240

Which of the following statements regarding the translation of foreign income taxes is true?

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -A country with very low or no income tax.

Magdala is a citizen of Italy 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 - 120 days First prior year - 150 days Second prior year - 150 days Is Magdala treated as a U.S.resident for the current year?

Performance,Inc. ,a U.S.corporation,owns 100% of Krumb,Ltd. ,a foreign corporation.Krumb earns only general basket income.During the current year,Krumb paid Performance a $200,000 dividend.The foreign tax credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%,so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash received?

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