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Exam 25: Taxation of International Transactions

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Question 41

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

A) Nondiscrimination tax.
B) Windfall U.S.profits tax.
C) Dividend repatriation tax.
D) Branch profits tax.

E) A) and C)
F) A) and D)

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Question 42

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Peanut,Inc. ,a U.S.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) $500,000
B) $275,000
C) $150,000
D) $5,000

E) A) and B)
F) A) and C)

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Question 43

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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:

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.

Krebs,Inc. ,a U.S.corporation,operates an unincorporated branch manufacturing operation in the U.K.Krebs,Inc. ,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return,along with $1,600,000 of taxable income from its U.S.operations.The U.K.branch income is all general limitation basket income.Krebs paid $270,000 in U.K.income taxes related to the $900,000 in branch income.Assuming a U.S.tax rate of 35%,what is Krebs' U.S.tax liability after any allowable foreign tax credits?

When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.

Unused foreign tax credits are carried back two years and then forward 20 years.

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 -U.S.taxpayers earning income outside the United States.

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.

Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

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 -Method for sourcing income and deductions.

With respect to income generated by non-U.S.persons,does the U.S.apply a "worldwide" or a "territorial" approach.Be specific.

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 -Rule that requires determination of the dividend equivalent amount.

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

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.

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

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 -A non-U.S.citizen who holds a "green card."

Maxim,Inc. ,a U.S.corporation,reports worldwide taxable income of $8 million,including a $900,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed E & P are $15 million and it has paid $6 million of foreign income taxes attributable to these earnings.What is Maxim's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach,because only income earned within the U.S.border is subject to taxation.

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 -Ownership percentage required before a deemed paid foreign tax credit is allowed.