Exam 25: Taxation of International Transactions

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?

Which of the following is not a foreign person?

Arendt, Inc., a domestic corporation, purchases a piece of equipment for use in its manufacture of custom pianos.The equipment is acquired in Ireland at a cost of 200,000 euros when 1 euro: $1.35.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1 euro: $1.15.What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?

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

Freiburg, Ltd., a foreign corporation, operates a U.S.branch that reports effectively connected U.S.earnings and profits (after income taxes) of $800,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $3 million and at the end of the tax year is $2.4 million.Freiburg is organized in a nontreaty country.Compute Freiburg's branch profits tax for the year.

Which of the following statements regarding the U.S.taxation of foreign persons is true?

Which of the following statements regarding the sourcing of dividend income is true?

Which of the following is a principle used in applying income sourcing under U.S.rules?

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Copp, Inc., a domestic corporation, owns 30% 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.Copp 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):

LocalCo merges into HeirCo, a non-U.S.entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S.income tax law, using §§ 351 and 368.

Britta, Inc., a U.S.corporation, reports foreign-source income and pays foreign taxes as follows. Britta's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume a 35% tax rate).What is Britta's U.S.tax liability after the FTC?

BlueCo, a domestic corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation.BlueCo transfers $200 in inventory (basis = $50) and $900 in land (basis = $950) to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain or loss, if any, is recognized as a result of this transaction?

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

Which of the following is not a U.S.person?

Subpart F income includes portfolio income like dividends and interest.

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?

The following persons own Schlecht Corporation, a foreign corporation. None of the shareholders are related.Subpart F income for the tax year is $300,000.No distributions are made.Which of the following statements is correct?

Abbott, Inc., a domestic corporation, reports worldwide taxable income of $8 million, including a $900,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings.What is Abbott's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Twenty unrelated U.S.persons equally own all of the stock of Quigley, a foreign corporation.Quigley is a CFC.