Exam 25: Taxation of International Transactions

Present, Inc., a domestic corporation, owns 60% of the stock of Past, Inc., a foreign corporation.For the current year, Present receives a dividend of $80,000 from Past.Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000, respectively.What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

SunCo, a domestic 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?

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

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

Match the definition with the correct term.

Dividends received from Leprechaun, Ltd., an Irish corporation that earns 40% of its income from U.S.business activities, are 40% U.S.-source income.

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

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.

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g.§§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Collins, Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.U.S.tax before the FTC is $175,000.Collins' current year FTC is $87,500.

A non-U.S.individual's "green card" remains in effect until:

Quest is organized and operates in the U.K. Its U.S.effectively connected earnings for the taxable year are $900,000 and its net U.S.equity has increased by $40,000. Quest's dividend equivalent amount for the tax year is $860,000.

Given the following information, determine whether Greta, an alien, is a U.S.resident for 2012.Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

OutCo, a controlled foreign corporation in Meena, earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the dividend payors are located in Meena.OutCo's Subpart F income for the year is:

Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Which of the following statements best describes the purpose of § 482, under which the Treasury can reallocate income and deductions among related taxpayers?

RainCo, a domestic 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?

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

Kunst, a domestic corporation, generates $100,000 of foreign-source income in the general income basket and $40,000 of foreign-source income in the passive income basket.Kunst's worldwide taxable income is $1,200,000, and its U.S.tax liability before FTC is $420,000.Foreign taxes attributable to the general income basket are $60,000 and to the passive income are $4,000.What is Kunst's foreign tax credit for the tax year?

Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's foreign tax credit related to the Starke dividend?