Exam 9: Taxation of International Transactions

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?

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.

Present, Inc., a U.S. corporation, owns 60% of the stock of Past, Inc., a foreign corporation. For the current year, Present receives a dividend of $80,000 from Past. Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000, respectively. What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

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

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -A deemed paid foreign tax credit is included in gross income.

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.

Kipp, a U.S. shareholder under the CFC provisions, owns 40% of a CFC. If the CFC's Subpart F income for the taxable year is $200,000, Kipp is taxed on receipt of a constructive dividend of $80,000.

Match the definition with the correct term -Foreign taxpayers earning income inside the United States.

Match the definition with the correct term -Rule that requires determination of the dividend equivalent amount.

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S. parent, followed by:

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:

Peanut, Inc., a U.S. corporation, receives $500,000 of foreign-source interest income, on which foreign taxes of $5,000 are withheld. Peanut's worldwide taxable income is $900,000, and its U.S. Federal income tax liability before FTC is $270,000. What is Peanut's foreign tax credit?

Match the definition with the correct term -Method for sourcing income and deductions.

OutCo, a controlled foreign corporation in Meena, earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the dividend payors are located in Meena. OutCo's Subpart F income for the year is:

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Foreign tax credit allowed for withholding taxes on payments from foreign sources.

Kunst, a U.S. corporation, generates $100,000 of foreign-source income in the general income basket and $40,000 of foreign-source income in the passive income basket. Kunst's worldwide taxable income is $1,200,000, and its U.S. tax liability before FTC is $420,000. Foreign taxes attributable to the general income basket are $60,000 and to the passive income are $4,000. What is Kunst's foreign tax credit for the tax year?

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.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Ownership percentage required before a deemed paid foreign tax credit is allowed.

Section 482 is used by the Treasury to: