Exam 25: Taxation of International Transactions

Ridge, Inc., a domestic corporation, reports worldwide taxable income of $800,000, including a $300,000 dividend from Emma, Inc., a foreign corporation.Ridge's U.S.tax liability before FTC is $280,000.Ridge owns 20% of Emma.Emma's E & P after taxes is $8 million and it has paid foreign taxes of $4 million attributable to that E & P.If Ridge elects the FTC, its U.S.gross income with regard to the dividend from Emma is:

Which of the following statements is false in regard to the U.S.income tax treaty program?

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

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?

A U.S.business conducts international communications activities between the U.S.and Spain. The resulting income is sourced 100% to the U.S., the residence of the taxpayer.

ForCo, a subsidiary of a U.S.corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation.USCo historically has earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

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

Kilps, a U.S.corporation, receives a $200,000 dividend from a 20% owned foreign corporation.The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000.Kilps's U.S.tax liability before the FTC is $350,000, the gross dividend income is $240,000, and Kilps's worldwide taxable income is $1 million.Kilps's foreign tax credit for the taxable year is:

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Jilt, a non-U.S.corporation, not resident in a treaty country, operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year. The branch increases its investments in U.S.property (its U.S.net equity) by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

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

Lang, an NRA who was not a resident of a treaty country, receives taxable dividends of $50,000 from U.S.corporations.Lang does not conduct a U.S.trade or business.Lang's dividends are taxed by the United States through withholding by the payor of:

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation.In November, Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Describe and diagram the timeline that most businesses use to enter the international markets.

Which of the following transactions by a U.S.corporation may result in taxation under § 367?

During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for $350,000, with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $20,000 on the date of sale.What is the source of the $330,000 gain on the sale of this equipment?

A controlled foreign corporation (CFC) realizes Subpart F income from: