Exam 25: Taxation of International Transactions

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

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?

Wood, a U.S.corporation, owns Holz, a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.80€.Wood's exchange gain or loss is:

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

RedCo, a domestic corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation.RedCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) 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?

Qwan, a U.S.corporation, reports $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.Qwan's U.S.and foreign assets are reported as follows. How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

In 2013, George renounces his U.S.citizenship and moves to Fredonia, where income tax rates are very low. George is a multimillionaire and says he "has had it" with high Federal income taxes on wealthy individuals like himself. In 2016, George's U.S.-source income is $1.5 million. That income escapes Federal income taxes.