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Exam 24: The Us Taxation of Multinational Transactions

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Question 51

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A Japanese corporation owned by 11 U.S. individuals cannot be treated as a controlled foreign corporation for U.S. tax purposes.

A) True
B) False

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Question 52

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All taxes paid to a foreign government by a U.S. individual are creditable on the individual's U.S. tax return.

A) True
B) False

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Question 53

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Reno Corporation, a U.S. corporation, reported total taxable income of $6,220,000 in the current year. Taxable income included $1,866,000 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 $461,000 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.

Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. During the current year, Horton paid a dividend of C$622,500 to Cruller. The dividend qualifies for the 100 percent dividends received deduction. The dividend was subject to a withholding tax of C$36,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,300,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

Obispo, Incorporated, a U.S. corporation, received the following sources of income: $20,000 interest income from a loan to its 100 percent owned U.S. subsidiary. $30,000 dividend income from its 5 percent owned Canadian subsidiary. $50,000 royalty income from its Irish subsidiary for use of a trademark within the United States. $40,000 rent income from its Dutch subsidiary for use of a warehouse located in Belgium. $3,000 capital gain from sale of stock in its 40 percent owned Mexican joint venture. Title passed in the United States. What amount of foreign source income does Obispo have?

Spartan Corporation, a U.S. company, manufactures widgets for sale in the United States and Europe. All manufacturing activities take place in the United States. During the current year, Spartan sold 110,000 widgets to European customers at a price of $7.00 each. Each widget costs $4.00 to produce. All of Spartan's production assets are located in the United States. Spartan ships its widgets FOB, place of destination. What amount of Spartan's gross profit is treated as coming from foreign sources?

Which of the following statements best describes the operation of subpart F as it applies to income earned by a foreign corporation?

Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark?

Hanover Corporation, a U.S. corporation, incurred $300,000 of interest expense during the current year. Hanover manufactures inventory that is sold within the United States and abroad. The total tax book value of its 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?

Saginaw Steel Corporation has a precredit U.S. tax of $118,000 on $513,000 of taxable income. Saginaw has $213,000 of foreign source taxable income and paid $73,000 of income taxes to the German government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Saginaw's foreign tax credit on its tax return will be: (Do not round intermediate calculations. Round your answer to nearest whole dollar amount.)

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.

Pierre Corporation has a precredit U.S. tax of $315,000 on $1,500,000 of taxable income in the current year. Pierre has $300,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income. Pierre paid $60,000 of foreign income taxes on the foreign branch income and $15,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Pierre use on its current U.S. tax return and what is the amount of the carryforward, if any?

Under which of the following scenarios could Charles, a citizen of England, be eligible to claim the "closer connection" exception to the substantial presence test in 2020?

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?

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?

Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $233,000. Title to the inventory passed FOB: shipping point. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

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.

Austin Corporation, a U.S. corporation, received the following investment income during the current year: $50,000 of dividend income from ownership of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its 50 percent owned Irish venture, and $30,000 capital gain from sale of its stock in a Brazilian corporation. How much of Austin's income is treated as foreign source?

Orono Corporation manufactured inventory in the United States and sold the inventory to customers in Canada. Gross profit from the sale of the inventory was $300,000. Title to the inventory passed FOB: destination. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

Which of the following incomes earned by a controlled foreign corporation incorporated in Spain is not foreign personal holding company income?