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Exam 9: Taxation of International Transactions

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Question 21

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Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

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B) False

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Question 22

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Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

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​ ​ Murray, Nancy, and Patricia are U.S...

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Question 23

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USCo, a U.S. corporation, purchases inventory from distributors within the U.S. and resells this inventory to customers outside the U.S., with title passing outside the U.S. Profit on the sale is $10,000. What is the source of the USCo's inventory sales income?

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

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?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. ​ Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

GreenCo, a U.S. corporation, earns $25 million of taxable income from U.S. sources and $10 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

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

In 2013, George renounces his U.S. citizenship and moves to Fredonia, where income tax rates are very low. George is a multimillionaire and says he "has had it" with high Federal income taxes on wealthy individuals like himself. In 2016, George's U.S.-source income is $1.5 million. That income escapes Federal income taxes.

GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

A Qualified Business Unit of a U.S. corporation that operates in Germany generally uses the Euro as its functional currency.

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S. multinational business.

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Jokerz, a CFC of a U.S. parent, generated $80,000 Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

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

Which of the following statements regarding income sourcing is not correct?

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations. Ferrell owns the other 60 percent of Shane Corporation. Both Shane and Ferrell are CFCs.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.