Exam 9: Taxation of International Transactions

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?

An advance pricing agreement (APA) is used between:

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S. parent, followed by:

Upon repatriation to a CFC, it does not create dividend income.

Yvonne is a citizen of France 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. Current year - 150 days First prior year - 150 days Second prior year - 90 days Is Yvonne treated as a U.S. resident for the current year?

A non­U.S. citizen who holds a "green card."

Foreign tax credit allowed for withholding taxes on payments from foreign sources.

Generally, accrued foreign income taxes are translated at the:

GreenCo, a U.S. corporation, earns $25 million of taxable income from U.S. sources and $10 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Columbia, Inc., a U.S. corporation, receives a $150,000 cash dividend from Starke, Ltd. Columbia owns 15% of Starke. Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P. What is Columbia's foreign tax credit related to the Starke dividend?

Which of the following situations requires the filing of an information return with the U.S. government?

Foreign taxpayers earning income inside the United States.

Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

Youngster, Inc., a U.S. corporation, earns $20,000 in passive foreign-source income and suffers a net loss of $60,000 in the general limitation basket. What is the numerator of the FTC limitation formula for Youngster's passive basket in the current year?

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?

Flapp Corporation, a U.S. 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?