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Exam 25: Taxation of International Transactions

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Question 61

True/False

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When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.

A) True
B) False

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Question 62

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A controlled foreign corporation (CFC) realizes Subpart F income from:

A) Purchase of inventory from unrelated party and sale outside the CFC country.
B) Purchase of inventory from a related party and sale outside the CFC country.
C) Services performed for the U.S.parent in a country in which the CFC was organized.
D) Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized.
E) None of the above transactions.

F) None of the above
G) B) and E)

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Question 63

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A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

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?

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

Ridge, Inc., a domestic corporation, reports worldwide taxable income of $800,000, including a $300,000 dividend from Emma, Inc., a foreign corporation.Ridge's U.S.tax liability before FTC is $280,000.Ridge owns 20% of Emma.Emma's E & P after taxes is $8 million and it has paid foreign taxes of $4 million attributable to that E & P.If Ridge elects the FTC, its U.S.gross income with regard to the dividend from Emma is:

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:

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

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?

Olaf, a citizen of Norway with no trade or business activities in the United States, sells at a gain 200 shares of MicroShift, Inc., a U.S.company.The sale takes place through Olaf's broker in Oslo.How is this gain treated for U.S.tax purposes?

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation.In November, Chang spends 12 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.

Lang, an NRA who was not a resident of a treaty country, receives taxable dividends of $50,000 from U.S.corporations.Lang does not conduct a U.S.trade or business.Lang's dividends are taxed by the United States through withholding by the payor of:

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:

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.

A U.S.business conducts international communications activities between the U.S.and Spain. The resulting income is sourced 100% to the U.S., the residence of the taxpayer.

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

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

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business claims effectively connected business deductions against that income.

Describe and diagram the timeline that most businesses use to enter the international markets.

During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for $350,000, with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $20,000 on the date of sale.What is the source of the $330,000 gain on the sale of this equipment?