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Exam 24: The Ustaxation of Multinational Transactions

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Question 31

Multiple Choice

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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?

A) Boomerang is a CFC and the U.S.corporation and U.S.individual will have a deemed dividend of $1,200,000 and $450,000,respectively.
B) Boomerang is a CFC and only the U.S.corporation will have a deemed dividend of $1,200,000.
C) Boomerang is a CFC and the U.S.corporation,U.S.individual,and Australian corporation will have a deemed dividend of $1,200,000,$450,000,and $1,350,000,respectively.
D) Boomerang is not a CFC and none of the shareholders will have a deemed dividend under subpart F.

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

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Question 32

True/False

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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.

A) True
B) False

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Question 33

Multiple Choice

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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?

All income earned by a Swiss corporation owned by a U.S.corporation is deferred from U.S.taxation until such income is remitted back to the United States.

Holmdel,Inc.,a U.S.corporation,received the following sources of income: $10,000 interest income from a loan to its 100 percent owned Swiss subsidiary $50,000 dividend income from its 5 percent owned French subsidiary $100,000 royalty income from its Bermuda subsidiary for use of a trademark outside the United States $25,000 rent income from its Canadian subsidiary for use of a warehouse located in New Jersey $50,000 capital gain from sale of stock in its 40 percent owned Japanese joint venture.Title passed in Japan. What amount of foreign source income does Holmdel have?

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

All passive income earned by a CFC will be treated as foreign personal holding company income under subpart F 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.

Marcel,a U.S.citizen,receives interest income from bonds issued by a Dutch corporation.The interest income will be considered U.S.source income for U.S.tax purposes.

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

Under the book value method of allocating and apportioning interest expense for FTC purposes,assets are characterized as being either U.S.or non-U.S.based on their geographic location.

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

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?

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?

Jesse Stone is a citizen and bona fide resident of Great Britain.During the current year,Jesse received the following income: Compensation of $10 million from performing concerts in the United States Cash dividends of $20,000 from a U.S.corporation Interest of $1,000 from a U.S.citizen who is a resident of Ireland Rent of $10,000 from British residents who rented Jesse's townhouse in Orlando,Florida Gain of $50,000 on the sale of stock in a U.S.corporation Determine the source (U.S.or foreign)of each item of income Jesse received.

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?

Which of the following items of foreign source income is classified as passive category income for foreign tax credit purposes?

Which of the following expenses incurred by a U.S.corporation is not subject to special apportionment rules for foreign tax credit purposes?

Reno Corporation,a U.S.corporation,reported total taxable income of $6,000,000 in the current year.Taxable income included $1,800,000 of foreign source taxable income from the company's branch operations in Canada.All of the branch income is foreign branch income.Reno paid Canadian income taxes of $450,000 on its branch income.Compute Reno's net U.S.tax liability and any foreign tax credit carryover.Assume an exchange rate of C$1 = $1.

Which of the following tax or non-tax benefits does not arise when a U.S.corporation forms a hybrid entity in Germany through which to earn business profits in Germany and elects to have the entity treated as a branch for U.S.tax purposes?