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Exam 9: Taxation of International Transactions

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Question 41

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The following persons own Schlecht Corporation, a foreign corporation. None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

A) Schlecht is not a CFC.
B) Chee includes $90,000 in gross income.
C) Marina is not a U.S. shareholder.
D) Marina includes $24,000 in gross income.

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

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Question 42

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U.S. individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

A) True
B) False

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Question 43

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Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30 percent.

Zhang, an NRA who is not a resident of a treaty country, receives taxable dividends of $50,000 from U.S. corporations. Zhang does not conduct a U.S. trade or business. Zhang's dividends are subject to withholding by the payor of:

Which of the following statements regarding income sourcing is correct?

A controlled foreign corporation (CFC) realizes Subpart F income from:

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Kipp, a U.S. shareholder under the CFC provisions, owns 40% of a CFC. If the CFC's Subpart F income for the taxable year is $200,000, Kipp is taxed on receipt of a constructive dividend of $80,000.

WorldCo, a foreign corporation not engaged in a U.S. trade or business, receives $50,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 78% of its income from foreign sources. How much of WorldCo's interest income is U.S. source?

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the U.S. other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

Bilateral agreement between two countries related to tax issues.

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

A business operation that accounts for profits and losses using its functional currency.

Waldo, Inc., a U.S. corporation, owns 100% of Orion, Ltd., a foreign corporation. Orion earns only general basket income. During the current year, Orion paid Waldo a $5,000 dividend. The foreign tax credit associated with this dividend is $3,000. The foreign jurisdiction requires a withholding tax of 10%, so Waldo received only $4,500 in cash as a result of the dividend. What is Waldo's total U.S. gross income reported as a result of the $4,500 cash received?

Treasury powers over transfer pricing.

KeenCo, a U.S. corporation, is the sole shareholder of LovettCo, a controlled foreign corporation. LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo. LovettCo also holds $200,000 E & P attributable to income taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $150,000 dividend distribution to KeenCo. Ignoring any deemed paid credit implications, what is the U.S. gross income to KeenCo resulting from this dividend?

Dividends received from Murdock Corp., a corporation organized in Sustenato that earns 70% of its income from U.S. business activities, are 70% U.S.-source income.

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Maximum years for a foreign tax credit carryback.

A CFC's profits from sales of goods and services.