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Exam 25: Taxation of International Transactions

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Question 1

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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?

A) $0,he is an NRA.
B) The amount realized times the top individual tax rate.
C) The net gain times the top capital gains tax rate.
D) The net gain taxed at the lesser of the applicable regular or AMT rates.

E) None of the above
F) B) and C)

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Question 2

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Freiburg,Ltd. ,a foreign corporation,operates a U.S.branch that reports effectively connected U.S.earnings and profits (after income taxes) of $900,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $3.5 million and at the end of the tax year is $2 million.Freiburg is organized in a nontreaty country.Compute Freiburg's branch profits tax for the year.

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The branch profits tax is equal to 30% o...

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Question 3

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Which of the following statements regarding the U.S.taxation of non-U.S.persons is true?

Kilps,a U.S.corporation,receives a $200,000 dividend from a 20% owned foreign corporation.The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000.Kilps's U.S.tax liability before the FTC is $350,000,the gross dividend income is $240,000,and Kilps's worldwide taxable income is $1 million.Kilps's foreign tax credit for the taxable year is:

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.

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent,followed by:

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.Overall foreign loss -Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

Quest is organized and operates in the U.K.Its U.S.effectively connected earnings for the taxable year are $900,000 and its net U.S.equity has increased by $40,000.Quest's dividend equivalent amount for the tax year is $860,000.

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to tax at capital gains rates under FIRPTA.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.Overall foreign loss -A net loss in all foreign tax credit limitation baskets.

Present,Inc. ,a U.S.corporation,owns 60% of the stock of Past,Inc. ,a foreign corporation.For the current year,Present receives a dividend of $80,000 from Past.Past's pools of E & P (after taxes) and foreign taxes are $4,000,000 and $500,000,respectively.What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

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?

Columbia,Inc. ,a U.S.corporation,receives a $150,000 cash dividend from Starke,Ltd.Columbia owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P.What is Columbia's gross income related to the Starke dividend?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a.Indirect credit b.Direct credit c.One d.Two e.Ten f.Twenty g.Gross-up (§ 78) h.Overall foreign loss -Maximum years for a foreign tax credit carryback.

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?

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?

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?

ForCo,a foreign corporation not engaged in a U.S.trade or business,recognizes a $3 million gain from the sale of land located in the United States.The amount realized on the sale was $50 million.Absent any exceptions,what is the required withholding amount on the part of the purchaser of this land?

Which of the following transactions by a U.S.corporation may result in taxation under § 367?