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Exam 9: Taxation of International Transactions

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Question 81

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Which of the following statements is true, regarding the sourcing of dividend income?

A) Dividends are sourced based on the residence of the recipient.
B) Dividends from a U.S. corporation are U.S.-source based on the percentage of U.S.-source income earned by the U.S. payor.
C) Dividends from a U.S. corporation are U.S. source, without regard to where the U.S. corporation generated the E & P.
D) Dividends from a U.S. corporation are foreign-source based on the percentage of foreign-source income earned by the U.S. payor.

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

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Question 82

True/False

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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.

A) True
B) False

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Question 83

Multiple Choice

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

An advance pricing agreement (APA) is used between:

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

Which of the following situations requires the filing of an information return with the U.S. government?

In allocating interest expense between U.S. and foreign sources, a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.

The transfer of the assets of a U.S. corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

Match the definition with the correct term. -Income of foreign person taxed through filing of a U.S. tax return with deductions allowed against gross income.

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. $\begin{array}{lr}\text { Generating U.S.-source income } & \$ 15,000,000 \\\text { Generating foreign-source income } & 25,000,000 \\\text { Total } &\$ 40,000,000\end{array}$ ​ Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

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:

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

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.

Which of the following is a principle used in applying the income-sourcing rules under U.S. tax law?

Discuss the primary purposes of income tax treaties.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Number of foreign tax credit limitation baskets.

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

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) ?

Wellington, Inc., a U.S. corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year. Included in that amount is $20 million of Subpart F income. Wellington has been a CFC for the entire year and makes no distributions in the current year. Wellington must include in gross income (before any § 78 gross-up) :

Luisa, a non-U.S. person with a green card, spends the following days in the United States. $\begin{array}{ll}\text { Year } 1 & 360 \text { days } \\\text { Year } 2 & 210 \text { days } \\\text { Year } 3 & 30 \text { days }\end{array}$ Luisa's residency status for Year 3 is: