Exam 25: Taxation of International Transactions

Performance, Inc., a U.S.corporation, owns 100% of Krumb, Ltd., a foreign corporation.Krumb earns only general basket income.During the current year, Krumb paid Performance a $200,000 dividend.The foreign tax credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%, so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash received?

Losses and deductions, similar to income items, can be U.S.- or foreign-source.

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?

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

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?

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

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

Kipp, a U.S.shareholder under the CFC provisions, owns 40% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000, Kipp is not taxed on receipt of a constructive dividend of $80,000 because he doesn't own more than 50% of the CFC.

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.

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

Waltz, Inc., a U.S.taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S.taxes of $157,500 before FTC. Waltz's FTC is $50,000.

Which of the following transactions, if entered into by an NRA, is not subject to U.S.taxation?

Peanut, Inc., a domestic corporation, receives $500,000 of foreign-source interest income, on which foreign taxes of $5,000 are withheld.Peanut's worldwide taxable income is $900,000, and its U.S.Federal income tax liability before FTC is $270,000.What is Peanut's foreign tax credit?

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Which of the following statements regarding the U.S.taxation of foreign persons 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:

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.

OutCo, a controlled foreign corporation in Meena, earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the dividend payors are located in Meena.OutCo's Subpart F income for the year is:

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.

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?