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Exam 24: The Us Taxation of Multinational Transactions

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Question 31

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Ames Corporation has a precredit U.S. tax of $340,000 on $1,000,000 of taxable income in 2016. Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the Australian government on this income. All of the foreign source income is treated as general category income for foreign tax credit purposes. Ames's foreign tax credit on its 2016 tax return will be:

A) $72,000
B) $120,000
C) $204,000
D) $340,000

E) None of the above
F) A) and D)

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Question 32

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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.

A) Taxable income of $350,000 and a net U.S.tax liability of $0
B) Taxable income of $350,000 and a net U.S.tax liability of $20,000
C) Taxable income of $500,000 and a net U.S.tax liability of $170,000
D) Taxable income of $500,000 and a net U.S.tax liability of $20,000

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

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Question 33

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Which of the following transactions engaged in by a Swiss controlled foreign corporation creates foreign base company sales income?

Flint Steel Corporation has a precredit U.S. tax of $170,000 on $500,000 of taxable income in 2016. Flint 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. Flint's foreign tax credit on its 2016 tax return will be:

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

Russell Starling, an Australian citizen and resident, received the following investment income during 2016: $5,000 of dividend income from ownership of stock in a U.S. corporation, $10,000 interest from a certificate of deposit in a U.S. bank, $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,000 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 in 2016?

Which statement best describes the U.S. framework for determining if an individual who is not a U.S. citizen will be treated as a resident alien for U.S. tax purposes?

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?

Jesse Stone is a citizen and bona fide resident of Great Britain. During 2016, 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 in 2016.

The gross profit from a sale of inventory manufactured in the United States and sold in Spain will always be treated as 100 percent U.S. source income.

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.

Emerald Corporation is a 100 percent owned Irish subsidiary of Shamrock, Inc., a U.S. corporation. Emerald had post-1986 earnings and profits of €2,625,000 and post-1986 foreign taxes of $525,000. During the current year, Emerald paid a dividend of €525,000 to Shamrock. The dividend was characterized as general category income for FTC purposes. The dividend was subject to a withholding tax of €26,250. Assume an exchange rate of €1 = $1.50. Shamrock reported U.S. taxable income of $1,000,000. Shamrock's U.S. tax rate is 34 percent. Compute Shamrock's net U.S. tax liability for the current year and excess FTC, if any.

Nicole is a citizen and resident of Australia. She has a full-time job in Australia and has lived there with her family for the past 10 years. In 2014, Nicole came to the United States on business and stayed for 180 days. She came to the United States again on business in 2015 and stayed for 150 days. In 2016 she came back to the United States on business and stayed for 100 days. Does Nicole meet the U.S. statutory definition of a resident alien in 2016 under the substantial presence test?

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

Philippe is a French citizen. During 2016 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2016, he will not be treated as a resident alien for U.S. tax purposes.

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.

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

Subpart F income earned by a CFC will always be treated as a deemed dividend to the CFC's U.S. shareholders in the year the subpart F income is earned.

Natsumi is a citizen and resident of Japan. She has a full-time job in Japan and has lived there with her family for the past 20 years. In 2014, Natsumi came to the United States on business and stayed for 240 days. She came to the United States again on business in 2015 and stayed for 120 days. In 2016 she came back to the United States on business and stayed for 120 days. Does Natsumi meet the U.S. statutory definition of a resident alien in 2016 under the substantial presence test?

Bismarck Corporation has a precredit U.S. tax of $340,000 on $1,000,000 of taxable income in 2016. Bismarck has $200,000 of foreign source taxable income characterized as general category income and $50,000 of foreign source taxable income characterized as passive category income. Bismarck paid $80,000 of foreign income taxes on the general category income and $10,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Bismarck use on its 2016 U.S. tax return and what is the amount of the carryforward, if any?