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Exam 25: Taxation of International Transactions

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Question 81

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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?

A) $30,000
B) $140,000
C) $200,000
D) $230,000

E) All of the above
F) B) and C)

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Question 82

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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. Is Yvonne treated as a U.S.resident for the current year?

A) No, because Yvonne is a citizen of France.
B) No, because Yvonne was not present in the United States at least 183 days during the current year.
C) No, because although Yvonne was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years.
D) Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years (using the appropriate fractions for the prior years) .

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

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Question 83

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Columbia,Inc.,a U.S.corporation,receives a $150,000 cash dividend from Starke,Ltd.Columbia owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P.What is Columbia's gross income related to the Starke dividend?

Match the definition with the correct term. a.Expatriate b.Resident c.Nonresident alien d.U.S. trade or business e.Branch profits tax f.Effectively connected income -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. ​ Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

GoldCo,a U.S.corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.GoldCo transfers $200 in inventory (basis = $50) and $900 in land (basis = $950) to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the U.S.What gain or loss,if any,does GoldCo recognize as a result of this transaction?

Jokerz,a CFC of a U.S.parent,generated $80,000 Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

Jaime received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000.Jaime's total U.S.tax liability is $800,000 (the 35% marginal tax rate applies).Jaime's current year FTC is $87,500.

Generally,accrued foreign income taxes are translated at the:

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.

The following persons own Schlecht Corporation,a non-U.S.entity. ​ None of the shareholders are related.Subpart F income for the tax year is $300,000.No distributions are made.Which of the following statements is correct?

A tax haven often is:

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

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 business operation that accounts for profits and losses using its functional currency.

Your client holds foreign tax credit (FTC) carryforwards,i.e.,it is in an "excess credit" position.Give at least three planning ideas that the client should implement,so as to free up the suspended FTCs.

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g. §§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Britta,Inc.,a U.S.corporation,reports foreign-source income and pays foreign taxes as follows. Britta's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume a 35% tax rate).What is Britta's U.S.tax liability after the FTC?

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S.multinational business.

USCo,a U.S.corporation,purchases inventory from distributors within the U.S.and resells this inventory to customers outside the U.S.,with title passing outside the U.S.Profit on the sale is $10,000.What is the source of the USCo's inventory sales income?

The United States has in force income tax treaties with about 70 countries.