Exam 9: Taxation of International Transactions

PlantCo is a company based in Adagio. PlantCo uses a formula to manufacture pharmaceuticals. The formula was developed and is owned by DrugCo, a U.S. entity. Royalties paid by PlantCo to DrugCo for the use of the formula are U.S.-source income.

Which of the following statements is false in regard to the U.S. income tax treaty program?

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

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. Current year - 150 days First prior year - 150 days Second prior year - 90 days Is Yvonne treated as a U.S. resident for the current year?

Which of the following statements regarding income sourcing is correct?

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 when a foreign corporation makes a distribution to its parent corporation.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for $350,000, with title passing to the buyer in France. USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income. USACo's adjusted basis in the equipment is $20,000 on the date of sale. What is the source of the $330,000 gain on the sale of this equipment?

Gains on the sale of U.S. real property held directly or indirectly through U.S. stock ownership by NRAs and foreign corporations are subject to tax at capital gains rates under FIRPTA.

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

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:

Generally, accrued foreign income taxes are translated at the:

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the source of AirCo's inventory sales income?

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

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S. trade or business?

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

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.