Exam 16: US Taxation of Foreign-Related Transactions

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?

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 true.

Identify which of the following statements is false.

A U.S.citizen accrued $120,000 of creditable foreign taxes last year.The citizen's foreign tax credit limitation for last year is $90,000 (only a single limitation need be calculated).The excess foreign tax credit limitation for the year preceding the year in which the excess foreign taxes were incurred is $2,000.A similar $2,000 excess foreign tax credit limitation position is expected in each of the next 10 years.What portion of the excess foreign taxes can be expected to be noncreditable because of the foreign tax credit limitation?

Identify which of the following statements is true.

Compare the foreign tax payment claimed as a deduction versus a similar payment claimed as a credit.Create an example to demonstrate the tax effect.Use 28% as the marginal tax rate in your example.

Alan,a U.S.citizen,works in Germany and earns $70,000,paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's excess foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

Ashley,a U.S.citizen,works in England for part of the year.She earns $40,000 in England,paying $10,000 in income taxes to the British government.Her U.S.income is $60,000 and she pays $12,000 in U.S.taxes.Her taxes on her worldwide income are $20,000.What is Ashley's foreign tax credit? Assume she does not qualify for the foreign-earned income exclusion.

Nonresident aliens are not allowed to claim the standard deduction.

Define the term "nonresident alien" and discuss the special tax consequences of U.S.taxation on various types of income of a nonresident alien.

The physical presence test method of qualifying for the foreign-earned income exclusion requires the

Which of the following characteristics is not used by the U.S.government to determine the tax treatment accorded 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 $30,000 of dividend income paid by a U.S.corporation on a stock investment portfolio unrelated to his trade or business.How will the dividend be taxed and how will the tax be collected?

Identify which of the following statements is true.

Jose,a U.S.citizen,has taxable income from U.S.sources of $15,000 and taxable income from a foreign country of $35,000.Assume the U.S.tax rate is 25% and Jose paid $12,000 in taxes to the foreign country.What foreign tax credit can be claimed by Jose?

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in France.During the current year,Foreign Corporation reports $100,000 of E&P,pays $30,000 in foreign income taxes,and remits $40,000 of dividends ratably to its shareholders.In prior post-1986 tax years,Foreign Corporation reported $60,000 of E&P,paid foreign income taxes of $20,000,and paid no dividends.What is U.S.Corporation's deemed paid foreign tax credit for the current-year dividend?

Domestic corporation X owns all the stock of controlled foreign corporation (CFC)T.X's acquisition cost for the CFC investment is $150,000.The CFC reports E&P of $200,000 since the domestic corporation acquired its interest,of which $120,000 was Subpart F income.The CFC makes a cash distribution of $90,000 to the domestic corporation.What is the domestic corporation's basis for its investment in T immediately after the cash distribution?

Bell Corporation,a domestic corporation,sells jars to its wholly owned foreign subsidiary,Jam.Jam Corporation is incorporated in and pays taxes to Country J.Bell Corporation normally sells jars to a U.S.wholesaler providing services similar to those provided by Jam at a price of $4 per unit.Both wholesalers incur similar costs.If Bell Corporation sells jars to Jam for $3 per unit,what are the tax effects?

Perry,a U.S.citizen,is transferred by his employer to Japan for a three-year assignment.Which one of the following items is not excluded under Sec.911?