Exam 25: Taxation of International Transactions

Match the definition with the correct term.

Liang, an NRA, is sent to the United States by Fuller Corporation, her foreign employer.She spends 50 days in the United States and earns $15,000 for a two-month period.This amount is attributable to 40 U.S.working days and 10 foreign working days.Her employer does not have a U.S.trade or business and Liang spends no other time in the U.S.for the tax year.Liang's U.S.-source taxable income is:

Scott, Inc., a domestic corporation, receives a dividend of $700,000 from a non-CFC foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott elects the FTC, its gross income attributable to this dividend is $700,000.

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?

The transfer of the assets of a U.S.corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

"Inbound" and "offshore" asset transfers by a U.S.business can be subject to immediate Federal income taxation under § 367.

USCo, a domestic corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Discuss the primary purposes of income tax treaties.

With respect to income generated by non-U.S.persons, does the U.S.apply a "worldwide" or a "territorial" approach. Be specific.

KeenCo, a domestic corporation, is the sole shareholder of LovettCo, a controlled foreign corporation.LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo. LovettCo also holds $200,000 E & P attributable to income taxed to the U.S.shareholder as Subpart F income.LovettCo makes a $150,000 dividend distribution to KeenCo.Ignoring any deemed paid credit implications, what is the U.S.gross income to KeenCo resulting from this dividend?

Jokerz, a CFC of a U.S.parent, generated $80,000 of Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $80,000 in the first year and $50,000 in the second year.

Which of the following statements regarding income sourcing is correct?

USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

An advance pricing agreement (APA) is used between:

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S.parent corporation.The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo.The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

During 2012, Martina, an NRA, receives interest income of $50,000 from Collins, Inc., an unrelated U.S.corporation.Considering the following facts related to Collins' operations, what is the source of the interest income received by Martina?

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

WorldCo, a foreign corporation not engaged in a U.S.trade or business, receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?

Magdala is a citizen of Italy and does not have permanent resident status in the United States.During the last three years she has spent a number of days in the United States. Is Magdala treated as a U.S.resident for the current year?