Exam 25: Taxation of International Transactions

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Foreign base company income b.Foreign personal holding company income c.Controlled foreign corporation d.U.S. shareholder e.Previously taxed income f.More than 10 percent g.More than 50 percent h.More than 80 percent -Owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation.

Kunst,a U.S.corporation,generates $100,000 of foreign-source income in the general income basket and $40,000 of foreign-source income in the passive income basket.Kunst's worldwide taxable income is $1,200,000,and its U.S.tax liability before FTC is $420,000.Foreign taxes attributable to the general income basket are $60,000 and to the passive income are $4,000.What is Kunst's foreign tax credit for the tax year?

ForCo,a foreign corporation not engaged in a U.S.trade or business,recognizes a $3 million gain from the sale of land located in the United States.The amount realized on the sale was $50 million.Absent any exceptions,what is the required withholding amount on the part of the purchaser of this land?

In allocating interest expense between U.S.and foreign sources,a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.​Overall foreign loss -A net loss in all foreign tax credit limitation baskets.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Foreign base company income b.Foreign personal holding company income c.Controlled foreign corporation d.U.S. shareholder e.Previously taxed income f.More than 10 percent g.More than 50 percent h.More than 80 percent -A non-U.S.subsidiary whose income may be taxed to the U.S.parent before repatriation.

Match the definition with the correct term. a.Expatriate b.Resident c.Nonresident alien d.U.S. trade or business e.Branch profits tax f.Effectively connected income -Individual who is not a U.S.citizen or resident.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.​Overall foreign loss -Maximum years for a foreign tax credit carryback.

Dividends received from a domestic corporation are totally sourced to the U.S.:

Winnie,Inc.,a U.S.corporation,receives a dividend of $400,000 from a non-CFC foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Winnie elects the FTC,its gross income attributable to this dividend is $400,000.

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Bilateral agreement between two countries related to tax issues.

WaterCo,a domestic corporation,purchases inventory for resale from unrelated distributors outside the U.S.It resells this inventory to U.S.customers,with title passing inside the United States.What is the source of WaterCo's inventory sales income?

The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates.

Present,Inc.,a U.S.corporation,owns 60% of the stock of Past,Inc.,a foreign corporation.For the current year,Present receives a dividend of $80,000 from Past.Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000,respectively.What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

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?

Waldo,Inc.,a U.S.corporation,owns 100% of Orion,Ltd.,a foreign corporation.Orion earns only general basket income.During the current year,Orion paid Waldo a $5,000 dividend.The foreign tax credit associated with this dividend is $3,000.The foreign jurisdiction requires a withholding tax of 10%,so Waldo received only $4,500 in cash as a result of the dividend.What is Waldo's total U.S.gross income reported as a result of the $4,500 cash received?

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.

WorldCo,a foreign corporation not engaged in a U.S.trade or business,receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?