Exam 9: Taxation of International Transactions

Flapp Corporation, a domestic corporation, conducts all of its transactions in the U.S. dollar. It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can. The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can. What is Flapp's exchange gain or loss on this sale?

Young, Inc., a U.S. corporation, earns foreign-source income classified in two different income baskets in the current year. It earns $100,000 in passive foreign-source income and suffers a net loss of $70,000 in the general basket. What is the numerator of the FTC limitation formula for the passive basket in the current year?

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 false? Gains from the disposition of U.S. real property are:

Gain or loss on the exchange of foreign currency is considered separately from the underlying transaction (e.g., the purchase or sale of goods).

GreenCo, a domestic corporation, earns $25 million of taxable income from U.S. sources and $5 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

Shannon, a foreign person with a green card, spends the following days in the United States. Shannon's residency status for 2012 is:

A domestic corporation is one whose assets are primarily (> 50%) located in the U.S.

Which of the following statements regarding income sourcing is correct?

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

U.S. income tax treaties:

If a foreign corporation's U.S. effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000, its dividend equivalent amount is $940,000.

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

Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

Which of the following statements regarding income sourcing is not correct?

Olaf, a citizen of Norway with no trade or business activities in the United States, sells at a gain 200 shares of MicroShift, Inc., a U.S. company. The sale takes place through Olaf's broker in Oslo. How is this gain treated for U.S. tax purposes?

In all cases, the "residence of seller" rule is used in determining the sourcing of income.

Which of the following statements regarding a foreign person's U.S. tax consequences is true?

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?

Dividends received from a domestic corporation are totally U.S. source:

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