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Exam 25: Taxation of International Transactions

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Question 61

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Amber,Inc.,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's foreign tax credit related to the Starke dividend?

A) $200,000.
B) $150,000.
C) $100,000.
D) $75,000.

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

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Question 62

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Jilt,a non-U.S.corporation,not resident in a treaty country,operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year.The branch increases its investments in U.S.property (its U.S.net equity) by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

A) $720,000.
B) $1,200,000.
C) $2,153,846.
D) $2,873,846.

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

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Question 63

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Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

USCo,a domestic corporation,purchases inventory for resale from distributors within the U.S.and resells this inventory to customers outside the U.S.,with title passing outside the U.S.What is the source of the USCo's inventory sales income?

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Which of the following is a principle used in applying income sourcing under U.S.rules?

The transfer of the assets of a U.S.corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

Interest paid to an unrelated party by a domestic corporation that historically earns 75% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

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.

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 and $200,000 E & P attributable to income taxed to the U.S.shareholder as Subpart F income.LovettCo makes a $125,000 dividend distribution to KeenCo.Ignoring any deemed paid credit implications,what is the U.S.gross income to KeenCo resulting from this dividend?

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Which of the following is not a foreign person?

A non-U.S.individual's "green card" remains in effect until:

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?

Liang,an NRA,is sent to the United States by Fuller Corporation,her foreign employer.She spends 50 days in the United States and earns $15,000 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:

USCo has foreign-source income from a manufacturing operation,from sales of the manufactured goods,and from stocks and bonds held for investment.How many categories or "baskets" of income does USCo have for foreign tax credit limitation purposes?

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

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

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.