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Exam 13: The Ustaxation of Multinational Transactions

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Question 21

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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?

A) $24,000.
B) $8,000.
C) $6,000.
D) $0.

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

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Question 22

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Boca Corporation,a U.S.corporation,received a dividend of $800,000 from its 100 percent owned Swiss subsidiary.A deemed paid credit of $200,000 was available on the dividend.A five 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 broke even on its other operations and the FTC limitation is not binding? Use a U.S.tax rate of 34 percent.

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$1,000,000 of taxable income.The company...

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Question 23

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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.

Rafael is a citizen of Spain and a resident of the United States.During 2017,Rafael received the following income: Compensation of $5 million from competing in tennis matches in the U.S. Cash dividends of $10,000 from a Spanish corporation that earns 50 percent of its income from sales in the United States. Interest of $2,000 from a Spanish citizen who is a resident of the U.S. Rent of $5,000 from U.S.residents who rented his villa in Italy. Gain of $10,000 on the sale of stock in a German corporation. Determine the source (U.S.or foreign)of each item of income Rafael received in 2017.

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?

Knoxville Corporation,a U.S.corporation,incurred $300,000 of research and experimental (R&E) expenses during 2017.Knoxville sells inventory within the United States and abroad.Knoxville conducted all of the research related to the inventory within the United States.Gross sales of the inventory were $10,000,000,of which $3,000,000 was from foreign source sales.Gross profit from sale of the inventory was $5,000,000,of which $2,000,000 was from foreign source sales.What is the minimum amount of R&E expense that can be apportioned to the company's foreign source income for foreign tax credit purposes,assuming this is the first year the company makes this computation?

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.

Madrid Corporation is a 100 percent owned Spanish subsidiary of Doubloon Corporation,a U.S.corporation.Madrid had post-1986 earnings and profits of €4,200,000 and post-1986 foreign taxes of $2,700,000.During the current year,Madrid paid a dividend of €2,100,000 to Doubloon.Assume an exchange rate of €1 = $1.50.Compute the tax consequences to Doubloon as a result of this dividend.

A deemed paid credit is available on which of the following dividends received by a U.S.corporation?

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

Provo Corporation received a dividend of $350,000 from its 100 percent owned German subsidiary.A deemed paid credit of $150,000 was available on the dividend.No withholding tax was imposed on the dividend.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? Assume a U.S.tax rate of 34 percent.

Which of the following exceptions could cause subpart F income to be excluded from the deemed dividend regime?

Windmill Corporation,a Dutch corporation,is owned by the following unrelated persons: 50 percent by a U.S.corporation,5 percent by a U.S.individual,and 45 percent by a Swiss corporation.During the year,Windmill earned $2,000,000 of subpart F income.Which of the following statements is true about the application of subpart F to the income earned by Windmill?

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 2017?

Pierre Corporation has a precredit U.S.tax of $510,000 on $1,500,000 of taxable income in 2017.Pierre has $300,000 of foreign source taxable income characterized as general category income and $150,000 of foreign source taxable income characterized as passive category income.Pierre paid $90,000 of foreign income taxes on the general category 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 2017 U.S.tax return and what is the amount of the carryforward,if any?

Before subpart F applies,a foreign corporation must be a CFC for how many consecutive days?

Orleans Corporation,a U.S.corporation,manufactures boating equipment.Orleans reported sales from this product group of $200 million,of which $80 million were foreign source sales.The gross profit percentage for domestic sales was 20%,and the gross profit percentage from foreign sales was 10%.Orleans incurred R&E expenses of $15 million,all of which were conducted in the United States.What is the minimum amount of the R&E expense that can be apportioned to foreign source gross income for foreign tax credit purposes,assuming the company can elect either apportionment method?

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.

Saginaw Steel Corporation has a precredit U.S.tax of $170,000 on $500,000 of taxable income in 2017.Saginaw has $200,000 of foreign source taxable income and paid $80,000 of income taxes to the German government on this income.All of the foreign source income is treated as general category income for foreign tax credit purposes.Saginaw's foreign tax credit on its 2017 tax return will be:

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