Exam 25: Taxation of International Transactions

All of an NRA's U.S.-source income that is not effectively connected with a U.S.trade or business is subject to a flat U.S.income tax rate of 30% unless modified by a treaty.

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?

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

Sean,a citizen of Ireland with no trade or business activities in the United States,sells at a gain 200 shares of MicroSoft,Inc. ,a U.S.company.The sale takes place through Sean's broker in Dublin.How is this gain treated for U.S.tax purposes?

Which of the following items of CFC income constitute foreign base company sales income?

A U.S.corporation owns a German corporation.The U.S.corporation receives a dividend (non-Subpart F income)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€.The U.S.corporation's exchange gain or loss is:

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

ForCo,a controlled foreign corporation,earns $500,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the unrelated companies are located in ForCo's country of incorporation.ForCo's Subpart F income for the year is:

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Rufus,Inc. ,a domestic corporation,has worldwide taxable income of $800,000,including a $300,000 dividend from Emma,Inc. ,a § 902 noncontrolled foreign corporation.Rufus' U.S.tax liability before FTC is $280,000.Rufus owns 20% of Emma.Emma's post-1986 E & P after taxes is $8 million and it has paid foreign taxes of $5 million attributable to post-1986 E & P.If Rufus elects the FTC,its U.S.gross income with regard to the dividend from Emma is:

Scott,Inc. ,a domestic corporation,receives a dividend of $800,000 from a § 902 noncontrolled foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott,Inc.elects the FTC,its gross income attributable to this dividend is $800,000.

Liang,an NRA,is sent to the United States by Fu Corporation,her foreign employer.She spends 50 days in the United States and earns $10,000 for a two-month period.This amount is attributable to 40 U.S.working days and 10 foreign working days.Her employer does not have a U.S.trade or business and Liang spends no other time in the U.S.for the tax year.Liang's U.S.-source taxable income is:

A foreign corporation,not resident in a treaty country,has a U.S.branch that earns effectively connected E & P of $4 million for the tax year and increases its investments in U.S.property (its U.S.net equity)by $1,600,000.It pays a U.S.corporate income tax of $2,153,846.Its branch profits tax is:

Describe the importance of determining whether a foreign corporation is engaged in a U.S.trade or business.

A nonresident alien is defined as someone who is not a citizen or resident of the U.S.

Yosef Barbutz,an NRA,is employed by Fisher,Inc. ,a foreign corporation.In November,Yosef spends 12 days in the United States performing consulting services for Fisher's U.S.branch.He earns $5,000 per month.A month includes 28 workdays.

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

The green card remains in effect until:

In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?

BrazilCo,Inc. ,a foreign corporation with a U.S.trade or business,has U.S.-source income as follows. Determine BrazilCo's total U.S.tax liability for the year assuming a 35% corporate rate and no tax treaty.Assume BrazilCo leaves its U.S.branch profits invested in the United States and does not otherwise repatriate any of its U.S.assets during the year.