Exam 25: Taxation of International Transactions

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

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

Winnie,Inc. ,a U.S.corporation,receives a dividend of $400,000 from a non-CFC foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Winnie elects the FTC,its gross income attributable to this dividend is $400,000.

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

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

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.

Kipp,a U.S.shareholder under the CFC provisions,owns 40% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Kipp is taxed on receipt of a constructive dividend of $80,000.

Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

A U.S.business conducts international communications activities between the U.S.and Spain.The resulting income is sourced 100% to the U.S. ,the residence of the taxpayer.

Carol,a citizen and resident of Adagio,reports gross income that is effectively connected with a U.S.business.No deductions are allowed against this income,and Carol's U.S.tax rate is a flat 30 percent.

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

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 -Ownership threshold for U.S.shareholders to be deemed a controlled foreign corporation.

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Treasury powers over transfer pricing.

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Match the definition with the correct term. a.Expatriate b.Resident c.Nonresident alien d.U.S. trade or business e.Branch profits tax f.Effectively connected income -Activity that creates the potential for effectively connected income.

Goolsbee,Inc. ,a U.S.corporation,generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value) are as follows. Generating U.S.-source income $15,000,000 Generating foreign-source income 25,000,000 Total $40,000,000 ​ Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

In which of the following independent situations would Slane,a foreign corporation,be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen,10% by Kathy,12% by Leslie,10% by David,8% by Ben,and 48% by Mike.

Olde Town,Inc. ,a U.S.corporation,earns $100,000 in passive foreign-source income and suffers a net loss of $60,000 in the general basket.What is the numerator of Olde Town's FTC limitation formula for the passive basket in the current year?

BrazilCo,Inc. ,a foreign corporation with a U.S.trade or business,has U.S.-source income as follows. Dividend income from unrelated investment activities $ 50,000 Net U.S.-source effectively connected income 600,000 Determine BrazilCo's total U.S.tax liability for the year,assuming a 35% corporate rate and no tax treaty.BrazilCo leaves its U.S.branch profits invested in the United States,and it does not otherwise repatriate any of its U.S.assets during the year.