Exam 25: Taxation of International Transactions

During Year 4,Josita,an NRA,receives interest income of $50,000 from Talmadge,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Talmadge's operations,what is the source of the interest income received by Josita? U.S.-source Active foreign Total gross Year income business income income Year 1 $200,000 $ 500,000 $ 700,000 Year 2 50,000 950,000 1,000,000 Year 3 100,000 900,000 1,000,000 Totals $350,000 $2,350,000 $2,700,000 Year 4 $150,000 $ 950,000 $1,100,000

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 -Upon repatriation to a CFC,it does not create dividend income.

SilverCo,a U.S.corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.SilverCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain or loss,if any,is recognized as a result of this transaction?

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Which of the following is not a U.S.person?

LocalCo merges into HeirCo,a non-U.S.entity,in a transaction that would qualify as a "Type A" reorganization.The resulting realized gain is tax-deferred under U.S.income tax law,using §§ 351 and 368.

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

Xenia,Inc. ,a U.S.shareholder,owns 100% of Fredonia,a CFC.Xenia receives a $3 million cash distribution from Fredonia.Fredonia's E & P is composed of the following amounts. ∙ $500,000 attributable to previously taxed increases in investment in U.S.property. ∙ $1,500,000 attributable to previously taxed Subpart F income. ∙ $4,800,000 attributable to other E & P. Xenia recognizes a taxable dividend of:

In 2013,George renounces his U.S.citizenship and moves to Fredonia,where income tax rates are very low.George is a multimillionaire and says he "has had it" with high Federal income taxes on wealthy individuals like himself.In 2016,George's U.S.-source income is $1.5 million.That income escapes Federal income taxes.

Jaime received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000.Jaime's total U.S.tax liability is $800,000 (the 35% marginal tax rate applies).Jaime's current year FTC is $87,500.

A Qualified Business Unit of a U.S.corporation that operates in Germany generally uses the Euro as its functional currency.

Wood,a U.S.corporation,owns 30% of Hout,a foreign corporation.The remaining 70% of Hout is owned by other foreign corporations not controlled by Wood.Hout's functional currency is the euro.Wood receives a 50,000€ distribution from Hout.If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1,the exchange rate at year end is .95€: $1,and on the date of the dividend payment the exchange rate is 1.1€: $1,what is Wood's tax result from the distribution?

RainCo,a U.S.corporation,owns a number of patents related to designing umbrellas.RainCo licenses these patents to unrelated parties.TexCo,a domestic corporation,paid RainCo $100,000 in royalties related to these licenses.TexCo uses the patent information in its manufacturing process in its Canadian plant.IrishCo,an Irish corporation,paid RainCo $25,000 in royalties related to the licenses.IrishCo uses the patent information in its manufacturing process in its Michigan manufacturing plant.How much U.S.-source royalty income did RainCo earn from these licenses?

Liang,an NRA,is sent to the United States by Fuller Corporation,her foreign employer.She spends 50 days in the United States and earns $20,000 for a two-month period.This amount is attributable to 40 U.S.working days and 10 non-U.S.working days.Her employer does not have a U.S.trade or business and Liang spends no other time in the U.S.for the tax year.Liang's U.S.-source taxable income is:

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 -A non-U.S.subsidiary whose income may be taxed to the U.S.parent before repatriation.

A tax haven often is:

In allocating interest expense between U.S.and foreign sources,a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo historically has earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

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?

Serena,a nonresident alien,is employed by GlobalCo,a foreign corporation.Serena works in the United States for 3 days during the year,receiving a gross salary of $2,500 for this period.GlobalCo is not engaged in a U.S.trade or business.Under the "commercial traveler" exception,the $2,500 is not classified as U.S.-source income.