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Exam 13: The Us Taxation of Multinational Transactions

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Question 41

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Which of the following is not a benefit derived from an income tax treaty between the United States and another country?

A) Lower withholding tax rates imposed on cross-border dividend and interest payments.
B) A higher threshold for determining when a person has nexus in the other country.
C) Lower statutory tax rates imposed on effectively connected income (ECI) earned by a resident of one country in the other country.
D) A higher threshold before an individual is considered a resident of the other country for tax purposes.

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

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Question 42

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Gouda, S.A., a Belgian corporation, received the following sources of income: $10,000 interest income from a loan to its 100 percent owned Dutch subsidiary $20,000 dividend income from its 100 percent owned U.S. subsidiary $30,000 royalty income from its Irish subsidiary for use of a trademark outside the United States $40,000 rent income from its Canadian subsidiary for use of a warehouse located in Wisconsin $5,000 capital gain from sale of stock in its 40 percent owned New Zealand joint venture. Title passed in New Zealand. What amount of U.S. source income does Gouda have?

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$60,000.
U.S. source income co...

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Question 43

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The gross profit from a sale of inventory manufactured in the United States and sold by a U.S. retailer to a customer in Spain will always be treated as 100 percent U.S. source income.

Boca Corporation, a U.S. corporation, received a dividend of $800,000 from its 100 percent owned Swiss subsidiary. The dividend is eligible for the 100 percent dividends received deduction. A 5 percent withholding tax ($40,000) was imposed on the dividend. What amount of taxable income does the dividend generate on Boca's U.S. tax return and what is the company's net U.S. tax, assuming the company has $200,000 of U.S. source taxable income and the FTC limitation is not binding?

Ames Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income. Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the U.K. government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Ames's foreign tax credit on its tax return will be:

Which of the following foreign taxes is not creditable for U.S. tax purposes?

Ypsi Corporation has a precredit U.S. tax of $420,000 on $2,000,000 of taxable income in the current year. Ypsi has $400,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income. Ypsi paid $100,000 of foreign income taxes on the foreign branch income and $30,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Ypsi use on its U.S. tax return and what is the amount of the FTC carryforward, if any?

Rainier Corporation, a U.S. corporation, manufactures and sells quidgets in the United States and Europe. Rainier conducts its operations in Europe through a German GmbH, which the company elects to treat as a branch for U.S. tax purposes. Rainier also licenses the rights to manufacture quidgets to an unrelated company in China. During the current year, Rainier paid the following foreign taxes, translated into U.S. dollars at the appropriate exchange rate: What amount of creditable foreign taxes does Rainier incur?

Which of the following statements best describes the substantial presence test as it applies to determining if a non-U.S. citizen is a resident alien for U.S. tax purposes?

Polka Corporation is a 100 percent owned Polish subsidiary of Pierogi Inc., a U.S. corporation. During the current year, Polka paid a dividend of €525,000 to Pierogi. The dividend was subject to a withholding tax of €26,250. Assume an exchange rate of €1 = $1.50. Pierogi reported U.S. taxable income of $1,000,000. Compute Pierogi's net U.S. tax liability for the current year and excess FTC, if any.

Alex, a U.S. citizen, became a resident of Belgium in 2019. Alex will no longer be subject to U.S. taxation on income he earns in Belgium if such income is exempted from tax under the U.S.-Belgium treaty.

Provo Corporation, a U.S. corporation, received a dividend of $350,000 from its 100 percent owned German subsidiary. A withholding tax of $35,000 was imposed on the dividend. The dividend qualifies for the 100 percent dividends received deduction. What are the U.S. tax consequences to Provo on receipt of the dividend, assuming the foreign tax credit limitation is not binding and the company breaks even on its U.S. operations?

Giselle is a citizen and resident of Brazil, a country with which the United States does not have an income tax treaty. Giselle earned $24,000 of compensation while working within the United States. She worked 60 days in the United States and 180 days in Brazil. How much of her compensation earned in the United States will be subject to U.S. tax?

Boomerang Corporation, a New Zealand corporation, is owned by the following unrelated persons: 40 percent by a U.S. corporation, 15 percent by a U.S. individual, and 45 percent by an Australian corporation. During the year, Boomerang earned $3,000,000 of subpart F income. Which of the following statements is true about the application of subpart F to the income earned by Boomerang?

Which statement best describes the U.S. framework for determining if an individual who is not a U.S. citizen will be treated as a resident alien for U.S. tax purposes?

Cecilia, a Brazilian citizen and resident, spent 120 days working in the United States in the current year and earned $50,000. Because she spent more than 90 days in the United States, Cecilia's income will be treated as U.S. source and subject to U.S. taxation. The United States does not have an income tax treaty with Brazil.

Portland Corporation is a U.S. corporation engaged in the manufacture and sale of fishing equipment. The company handles its export sales through sales branches in Canada and Norway. The average tax book value of Portland's assets for the year was $300 million, of which $250 million generated U.S. source income and $50 million generated foreign source income. Portland's total interest expense for the year was $24 million. What amount of interest expense can Portland apportion against its foreign source gross income for foreign tax credit purposes, assuming there is no limitation on the interest expense deduction? (Do not round intermediate calculations. Round your answer to nearest whole dollar amount.)

A rectangle with a triangle within it is a symbol used to represent what organizational form?

Manchester Corporation, a U.S. corporation, incurred $100,000 of interest expense during the current year. Manchester manufactures inventory that is sold within the United States and abroad. The total tax book value of its U.S. production assets is $20,000,000. The total tax book value of its foreign production assets is $5,000,000. What amount of interest expense is apportioned to the company's foreign source income for foreign tax credit purposes, assuming the interest expense is fully deductible in the current year?

Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,000 of dividend income from ownership of stock in a U.S. corporation, $10,000 interest from a certificate of deposit in a U.S. bank, $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,000 capital gain from sale of a stock in a U.S. corporation. How much of Russell's income will be subject to U.S. taxation?