Exam 25: Taxation of International Transactions

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.

ForCo, a foreign corporation not engaged in a U.S. trade or business, recognizes a $3 million gain from the sale of land located in the United States. The amount realized on the sale was $50 million. Absent any exceptions, what is the required withholding amount on the part of the purchaser of this land?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

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

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

An advance pricing agreement (APA) is used between:

SunCo, a U.S. corporation, owns a number of patents related to designing sunglasses. SunCo licenses these patents to unrelated parties. SpainCo, a Spanish corporation, paid SunCo $78,000 in royalties related to these licenses. SpainCo uses the patent information in its manufacturing process in its Texas plant. WiscCo, a domestic corporation, paid SunCo $32,000 in royalties related to the licenses. WiscCo uses the patent information in its manufacturing process in its Germany manufacturing plant. How much U.S.-source royalty income did SunCo earn from these licenses?

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.

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

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

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

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the United States and sold outside the United States?

Match the definition with the correct term. -Treasury powers over transfer pricing.

Arendt, Inc., a U.S. corporation, purchases a piece of equipment for use in its manufacture of custom pianos. The equipment is acquired in Ireland at a cost of 200,000 euros when 1€: $1.25. Payment is due in 90 days. Arendt acquires 200,000 euros and pays for the machine when 1€: $1.15. What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

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

Without the foreign tax credit, double taxation would result when:

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

Britta, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes as follows. Income Taxes Passive category \ 200,000 \ 10,000 General limitation category 800,000 350,000 Britta's worldwide taxable income is $1,600,000 and U.S. taxes before FTC are $336,000 (21% tax rate). What is Britta's U.S. tax liability after the FTC?