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Exam 13: The Us Taxation of Multinational Transactions

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Question 51

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Holmdel, Incorporated, a U.S. corporation, received the following sources of income: $11,500 interest income from a loan to its 100 percent owned Swiss subsidiary. $50,750 dividend income from its 5 percent owned French subsidiary. $100,300 royalty income from its Bermuda subsidiary for use of a trademark outside the United States. $25,150 rent income from its Canadian subsidiary for use of a warehouse located in New Jersey. $50,150 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?

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Question 52

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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.

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Question 53

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Holmdel, Incorporated, 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?

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 100percent 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?

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

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$600,000 to Cruller.The dividend qualifies for the 100percent dividends received deduction. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,000,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

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:

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?

Alex, a U.S. citizen, became a resident of Belgium in 2020. 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.

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 $660 million, of which $550 million generated U.S. source income and $110 million generated foreign source income. Portland's total interest expense for the year was $30 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.)

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.

What form is used by a U.S. corporation to "check the box" to elect the U.S. tax consequences of forming a hybrid entity outside the United States?

Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,080 of dividend income from ownership of stock in a U.S. corporation, $10,400 interest from a certificate of deposit in a U.S. bank, $3,200 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,100 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 tax rule applies to an excess foreign tax credit (FTC) that arises in 2020?

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?

Which of the following tax benefits does not arise when a U.S. corporation forms a corporation in Ireland through which to earn business profits in Ireland?

Boca Corporation, a U.S. corporation, received a dividend of $814,000 from its 100 percent owned Swiss subsidiary. The dividend is eligible for the 100 percent dividends received deduction. A 5 percent withholding tax ($54,000) 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 companyhas $228,000 of U.S. source taxable income and the FTC limitation is not binding?

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 $3,800,000 of subpart F income. Which of the following statements is true about the application of subpart F to the income earned by Boomerang?

Obispo, Incorporated, a U.S. corporation, received the following sources of income: $27,000 interest income from a loan to its 100 percent owned U.S. subsidiary. $33,500 dividend income from its 5 percent owned Canadian subsidiary. $50,700 royalty income from its Irish subsidiary for use of a trademark within the United States. $41,400 rent income from its Dutch subsidiary for use of a warehouse located in Belgium. $37,000 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?

A non-U.S. citizen with a green card will always be treated as a resident alien for U.S. tax purposes regardless of the number of days she spends in the United States during the current year.