Exam 16: Ustaxation of Foreign-Related Transactions

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has $3,000 of interest income earned on a bank account in his home country and $1,800 of interest income earned on a bank account located in Addison,Illinois.How will the interest be taxed and how will the tax be collected?

Which of the following characteristics is not used by the U.S.government to determine the tax treatment accorded foreign-related transactions?

A nonresident alien cannot

A foreign corporation is owned by five unrelated individuals.John,Sam,and David are U.S.citizens who own 30%,18% and 9%,respectively,of the foreign corporation's single class of stock.Alberto and Manuel are nonresident aliens who own 37% and 6%,respectively,of the foreign corporation's stock.Which of the following statements is true?

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in Country T.In its first year of operations,Foreign Corporation earns 60,000 frugs of E&P,pays a 40,000- frug dividend,and pays 5,000 frugs in income taxes.The exchange rate between the dollar and the frug is: first year average,1 frug = $0.20; yearend,1 frug = $0.25; tax payment date,1 frug = $0.30; and dividend payment date,1 frug = $0.28.What is the translated dividend amount?

Cane Corporation owns 45% of the stock of Edmonton Airline Corporation.In its first year of operations,Edmonton Airline,a Canadian corporation,reports $400,000 of E&P and pays a $100,000 dividend to Cane Corporation.Edmonton Airline pays $50,000 in Canadian income taxes.All amounts are expressed in U.S.dollars.What is Cane Corporation's U.S.tax liability as a result of receiving the dividend? (Assume a 34% U.S.corporate tax rate. )

What are the consequences of classification as a corporate inversion?

Karen,a U.S.citizen,earns $40,000 of taxable income from U.S.sources,$20,000 in taxable wages from Country A and $20,000 in taxable interest from Country B.The U.S.tax rate is 25%.The tax on Country A income is $8,000,and Country B charges no tax on the interest income.Assuming two baskets are needed for the two types of income because the interest is passive income,Karen's foreign tax credit that can be claimed is

Identify which of the following statements is false.

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has a $15,000 capital gain on the sale of stock in a U.S.corporation while he was in the United States.The capital gain is not connected to his trade or business.How will the capital gain be taxed and how will the tax be collected?

U.S.citizen Barry is a bona fide resident of a foreign country for all of 2013.Barry uses a calendar year as his tax year and receives $158,000 in salary and allowances from his employer.Included in the $158,000 is a $25,000 housing allowance.Barry's housing costs are $30,000.The base housing amount for the current year is $15,616.What amount related to his housing can Barry exclude on his Form 2555?

Which of the following is an advantage of conducting foreign operations through a branch?

In January of the current year,Stan Signowski's U.S.employer assigned him to their Paris office.This year,he earned salary,a cost-of-living allowance,a housing allowance,a home leave allowance that permits him to return home once each year,and an education allowance to pay for U.S.schooling for his son.Stan and his wife,Jennifer,have rented an apartment in Paris and paid French income taxes.What tax issues does Stan need to consider when preparing his tax return?

Identify which of the following statements is true.

A foreign corporation with a single class of stock is owned equally by Jericho Corporation,a U.S.corporation,and Joshua,a nonresident alien.Joshua owns no Alpha Corporation stock.Is the foreign corporation a controlled foreign corporation (CFC)?

Identify which of the following statements is false.

Julia,an accrual-method taxpayer,is a U.S.citizen and a resident of a foreign country.Her tax year for both countries is a calendar year.Julia accrues 50,000 coras for the foreign country tax liability on December 31 of last year when the exchange rate is one cora = $1.Julia pays the tax to the foreign country on its due date,March 1 of the current year.The exchange rate on that date is one cora = $1.50.Julia files her U.S.tax return for last year on April 15 of the current year when the exchange rate is one cora = $2.Julia's foreign tax credit is

Identify which of the following statements is true.

Identify which of the following statements is true.

A foreign corporation is a CFC that is in its initial year of operation.For the current year,it reports $1 million of earnings and has an aggregate U.S.Property investment of $400,000.If none of the earnings qualified as Subpart F income,explain how the earnings are taxed.