Exam 9: Taxation of International Transactions

Olde Town, Inc., a U.S. corporation, earns $100,000 in passive foreign-source income and suffers a net loss of $60,000 in the general basket. What is the numerator of Olde Town's FTC limitation formula for the passive basket in the current year?

Bryden, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year. Bryden's current year E & P is $350,000, and its accumulated E & P is $15 million. What is the current year Subpart F deemed dividend to USCo?

Match the definition with the correct term -Individual who is not a U.S. citizen or resident.

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 foreign tax credit related to the Starke dividend?

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

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 statements is true, regarding the sourcing of dividend income?

Chipper, Inc., a U.S. corporation, reports worldwide taxable income of $1 million, including a $300,000 dividend from Emma, Inc., a foreign corporation. Chipper's U.S. tax liability before FTC is $340,000. Chipper owns 20% of Emma. Emma's E & P after taxes is $8 million and it has paid foreign taxes of $2 million attributable to that E & P. If Chipper elects the FTC, its U.S. gross income with regard to the dividend from Emma is:

KeenCo, a U.S. corporation, is the sole shareholder of LovettCo, a controlled foreign corporation. LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo. LovettCo also holds $200,000 E & P attributable to income taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $150,000 dividend distribution to KeenCo. Ignoring any deemed paid credit implications, what is the U.S. gross income to KeenCo resulting from this dividend?

Match the definition with the correct term -U.S. taxpayers earning income outside the United States.

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

BrazilCo, Inc., a foreign corporation with a U.S. trade or business, has U.S.-source income as follows. Determine BrazilCo's total U.S. tax liability for the year, assuming a 35% corporate rate and no tax treaty. BrazilCo leaves its U.S. branch profits invested in the United States, and it does not otherwise repatriate any of its U.S. assets during the year.

Subpart F income includes portfolio income like dividends and interest.

Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30 percent.

Which of the following statements regarding the taxation of U.S. real property gains recognized by non-U.S. persons not engaged in a U.S. trade or business is false? Gains from the disposition of U.S. real property are:

Zhang, an NRA who is not a resident of a treaty country, receives taxable dividends of $50,000 from U.S. corporations. Zhang does not conduct a U.S. trade or business. Zhang's dividends are subject to withholding by the payor of:

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Portfolio income treated as Subpart F income.

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?

Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

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.