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Exam 13: The Us Taxation of Multinational Transactions

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Question 51

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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?

A) Charles spent 183 days in the United States in 2020 and has his tax home in England.
B) Charles spent 183 days in the United States in 2020 and has his tax home in the United States.
C) Charles spent 182 days in the United States in 2020 and has his tax home in England.
D) Charles spent 182 days in the United States in 2020 and has his tax home in the United States.

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

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Question 52

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

A) Partnership
B) Corporation
C) Hybrid entity treated as a corporation for U.S. tax purposes
D) Hybrid entity treated as a partnership for U.S. tax purposes

E) A) and D)
F) All of the above

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Question 53

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Portsmouth Corporation, a British corporation, is a wholly owned subsidiary of Salem Corporation, a U.S. corporation. During the year, Portsmouth reported the following income: $250,000 interest income received from a loan to an unrelated French corporation. $100,000 dividend income received from a less than 1 percent owned unrelated Dutch corporation. $150,000 rent income from an unrelated British corporation on property Portsmouth actively manages. $500,000 gross profit from the sale of inventory manufactured by Portsmouth in Great Britain and sold to a 100 percent owned subsidiary in Germany. What amount of subpart F income does Portsmouth recognize in the current year?

Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary.The dividend is eligible for the 100percent dividends received deduction. Any income taxes paid to a Spanish taxing authority will be creditable on the U.S. tax return.

Which tax rule applies to an excess foreign tax credit (FTC) that arises in 2020?

Manchester Corporation, a U.S. corporation, incurred $210,000 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 $21,000,000. The total tax book value of its foreign production assets is $4,000,000. 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?

Provo Corporation, a U.S. corporation, received a dividend of $350,000 from its 100 percent owned German subsidiary. A withholding taxof $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?

The Canadian government imposes a withholding tax of 15 percent on a dividend paid by a Canadian corporation to a U.S. individual. The withholding tax will be creditable on the individual's U.S. tax return as an "in lieu of" tax.