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Exam 24: The Us Taxation of Multinational Transactions

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Question 21

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Rainier Corporation, a U.S. corporation, manufactures and sells quidgets in the United States and Europe. Rainier conducts its operations in Europe through a German GmbH, which the company elects to treat as a branch for U.S. tax purposes. Rainier also licenses the rights to manufacture quidgets to an unrelated company in China. During the current year, Rainier paid the following foreign taxes, translated into U.S. dollars at the appropriate exchange rate: What amount of creditable foreign taxes does Rainier incur?

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$1,800,000
Explanation: The cr...

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Question 22

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Cheyenne Corporation is a U.S. corporation engaged in the manufacture and sale of mining equipment. The company handles its export sales through sales branches in Canada and Mexico. The average tax book value of Cheyenne's assets for the year was $200 million, of which $100 million generated U.S. source income and $100 million generated foreign source income. The average fair market value of Cheyenne's assets was $600 million, of which $400 million generated U.S. source income and $200 million generated foreign source income. Cheyenne's total interest expense for the year was $30 million. What is the minimum amount of interest expense that Cheyenne can apportion against its foreign source gross income for foreign tax credit purposes, assuming the company can elect either apportionment method?

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$10 million
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Question 23

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The United States generally taxes U.S. source fixed and determinable, annual or periodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income.

Which of the following items of foreign source income is classified as passive category income for foreign tax credit purposes?

Under a U.S. treaty, what must a non-resident corporation create in the United States before it is subject to U.S. taxation on its business profits?

All passive income earned by a CFC will be treated as foreign personal holding company income under subpart F for U.S. tax purposes. F.

Orono Corporation manufactured inventory in the United States and sold the inventory to customers in Canada. Gross profit from the sale of the inventory was $300,000. Title to the inventory passed FOB: destination. Under the 50/50 method, how much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

Portland Corporation is a U.S. corporation engaged in the manufacture and sale of fishing equipment. The company handles its export sales through sales branches in Canada and Norway. The average tax book value of Portland's assets for the year was $300 million, of which $250 million generated U.S. source income and $50 million generated foreign source income. The average fair market value of Portland's assets was $500 million, of which $400 million generated U.S. source income and $100 million generated foreign source income. Portland's total interest expense for the year was $24 million. What is the minimum amount of interest expense that Portland can apportion against its foreign source gross income for foreign tax credit purposes, assuming the company can elect either apportionment method?

Hazelton Corporation, a U.S. corporation, manufactures golf equipment. Hazelton reported sales from this product group of $100 million, of which $40 million were foreign source sales. The gross profit percentage for domestic sales was 20%, and the gross profit percentage from foreign sales was 30%. Hazelton incurred R&E expenses of $10 million, all of which were conducted in the United States. What is the minimum amount of the R&E expense that can be apportioned to foreign source gross income for foreign tax credit purposes, assuming the company can elect either apportionment method?

Spartan Corporation, a U.S. company, manufactures widgets for sale in the United States and Europe. All manufacturing activities take place in the United States. During the current year, Spartan sold 100,000 widgets to European customers at a price of $5 each. Each widget costs $2 to produce. All of Spartan's production assets are located in the United States. For each independent scenario, determine the source of the gross profit from sale of the widgets using the 50/50 method. A.Spartan ships its widgets B.Spartan ships its widgets F.O.B., place of destination. F.O.B., place of shipment.

A rectangle with an inverted triangle within it is a symbol used to represent what organizational form?

Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary. For foreign tax credit purposes, the dividend will always be characterized as passive category income.

One of the tax advantages to using a corporation through which to earn income in Germany is deferral of U.S. taxation on active business income earned by the corporation until such income is remitted back to the United States.

Marcel, a U.S. citizen, receives interest income from bonds issued by a Dutch corporation. The interest income will be considered U.S. source income for U.S. tax purposes.

Gwendolyn was physically present in the United States for 90 days in 2016, 180 days in 2015, and 30 days in 2014. Under the substantial presence test formula, how many days is Gwendolyn deemed physically present in the United States in 2016?

Kiwi Corporation is a 100 percent owned Australian subsidiary of Exotic Fruit Corporation, a U.S. corporation. Kiwi had post-1986 earnings and profits of 1,000,000 Australian dollars (AUD) and post-1986 foreign taxes of $225,000. During the current year, Kiwi paid a dividend of 250,000 AUD to Exotic Fruit. Assume an exchange rate of 1 AUD = $0.75. No withholding tax was imposed on the dividend. What amount of taxable income does the dividend generate on Exotic's U.S. tax return?

Which of the following tax rules applies to an excess foreign tax credit (FTC) that arises in 2016?

Which of the following exceptions could cause subpart F income to be excluded from the deemed dividend regime?

Wooden Shoe Corporation is a 100 percent owned Dutch subsidiary of Tulip Corporation, a U.S. corporation. Wooden Shoe had post-1986 earnings and profits of €3,000,000 and post-1986 foreign taxes of $1,000,000. During the current year, Wooden Shoe paid a dividend of €300,000 to Tulip. Assume an exchange rate of €1 = $1.40. No withholding tax was imposed on the dividend. What amount of taxable income does the dividend generate on Tulip's U.S. tax return?

Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes?