Exam 25: Taxation of International Transactions

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.Overall foreign loss -Foreign tax credit allowed for withholding taxes on payments from foreign sources.

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?

Which of the following is not a foreign person?

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

In working with the foreign tax credit,a U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

Describe and diagram the timeline that most businesses use to enter the international markets.

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

Your client holds foreign tax credit (FTC) carryforwards,i.e. ,it is in an "excess credit" position.Give at least three planning ideas that the client should implement,so as to free up the suspended FTCs.

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.

Which of the following statements best describes the purpose of § 482,under which the Treasury can reallocate income and deductions among related taxpayers?

Luisa,a non-U.S.person with a green card,spends the following days in the United States. Year 1 360 days Year 2 210 days Year 3 30 days Luisa's residency status for Year 3 is:

Which of the following situations requires the filing of an information return with the U.S.government?

U.S.income tax treaties typically:

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Foreign base company income b.Foreign personal holding company income c.Controlled foreign corporation d.U.S. shareholder e.Previously taxed income f.More than 10 percent g.More than 50 percent h.More than 80 percent -Portfolio income treated as Subpart F income.

Freda was born and continues to live in Uruguay.She exports widgets to U.S.customers.The U.S.does not have in force an income tax treaty with Uruguay.Freda's net U.S.income from the widgets is subject to a flat 30% Federal income tax rate.

ForCo,a subsidiary of a U.S.corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

A domestic corporation is one whose assets are primarily located in the U.S.For this purpose,the primarily located test (>50%) applies.

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.80€.Wood's exchange gain or loss is:

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

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