Exam 9: Taxation of International Transactions

Copp,Inc.,a domestic corporation,owns 40% of a CFC that has $50 million of earnings and profits for the current year.Included in that amount is $20 million of Subpart F income.The CFC has been a CFC for the entire year and makes no distributions in the current year.Copp must include in gross income (before any § 78 gross-up):

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Individual who is not a U.S.citizen or resident.

Interest paid to an unrelated party by a domestic corporation that historically earns 81% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Rule that requires determination of the dividend equivalent amount.

Which of the following statements regarding the taxation of U.S.real property gains recognized by foreign persons not engaged in a U.S.trade or business is not true?

ForCo,a controlled foreign corporation,earns $500,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All the unrelated companies are located in ForCo's country of incorporation.ForCo's Subpart F income for the year is:

Benchmark,Inc.,a U.S.shareholder owns 100% of a CFC from which Benchmark receives a $3 million cash distribution.The CFC's E & P is composed of the following amounts. Benchmark recognizes a taxable dividend of:

A PFIC is a U.S.-based mutual fund owned more than 50% by U.S.owners.

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

Which of the following would not prevent an alien without a "green card" from being classified as a U.S.resident for income tax purposes?

U.S.income tax treaties:

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

Yosef Barbutz,an NRA,is employed by Fisher,Inc.,a foreign corporation.In November,Yosef spends 12 days in the United States performing consulting services for Fisher's U.S.branch.He earns $5,000 per month.A month includes 28 workdays.

Rufus,Inc.,a domestic corporation,has worldwide taxable income of $800,000,including a $300,000 dividend from Emma,Inc.,a § 902 noncontrolled foreign corporation.Rufus' U.S.tax liability before FTC is $280,000.Rufus owns 20% of Emma.Emma's post-1986 E & P after taxes is $8 million and it has paid foreign taxes of $5 million attributable to post-1986 E & P.If Rufus elects the FTC,its U.S.gross income with regard to the dividend from Emma is:

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

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Number of tiers of foreign corporations from which a deemed paid foreign tax credit is allowed.

Discuss the primary purpose of income tax treaties.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -Bilateral agreement between two countries related to tax issues.

Hickman,Inc.,a U.S.corporation,operates an unincorporated branch manufacturing operation in the United Kingdom.Hickman,Inc.,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return along with $1,300,000 of taxable income from its U.S.operations.Hickman paid $270,000 in U.K.income taxes related to the $900,000 in branch income. Assuming a U.S.tax rate of 35%,what is Hickman's U.S.tax liability after any allowable foreign tax credits?

Without the foreign tax credit,double taxation would result when: