Exam 9: Taxation of International Transactions

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:

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. Is Yvonne treated as a U.S.resident for the current year?

USCo,a domestic corporation,reports worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

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

ForCo,a foreign corporation,purchases widgets from USCo,Inc. ,its U.S.parent corporation.The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo.The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

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

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?

Which of the following statements regarding income sourcing is not correct?

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

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.

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?

Collins,Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.U.S.tax before the FTC is $175,000.Collins' current year FTC is $87,500.

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.

Subpart F income includes portfolio income like dividends and interest.

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

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

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?

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?

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.

A domestic corporation is one whose assets are primarily (> 50%)located in the U.S.