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Exam 25: Taxation of International Transactions

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Question 1

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Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

A) Non-U.S. persons may be subject to U.S. withholding tax on U.S.-source investment income.
B) Non-U.S. individuals may be subject to U.S. income tax but non-U.S. corporations are never subject to U.S. income tax.
C) Non-U.S. persons are only subject to U.S. income or withholding tax if engaged in a U.S. trade or business.
D) Non-U.S. persons must be physically present in the United States before any U.S.-source income is subject to U.S. income or withholding tax.

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

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Question 2

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During the current year,USACo (a domestic corporation) sold equipment to FrenchCo,a foreign corporation,for $350,000,with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment,all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $20,000 on the date of sale.What is the source of the $330,000 gain on the sale of this equipment?

A) $330,000 foreign source.
B) $330,000 U.S. source.
C) $250,000 foreign source and $80,000 U.S. source.
D) $250,000 U.S. source and $80,000 foreign source.

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

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Question 3

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

Which of the following statements regarding income sourcing is correct?

AirCo,a domestic corporation,purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States,with title passing outside the United States.What is the source of AirCo's inventory sales income?

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo historically has earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

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.Foreign base company income b.Foreign personal holding company income c.Controlled foreign corporation d.U.S. shareholder e.Previously taxed income f.More than 10 percent g.More than 50 percent h.More than 80 percent -Ownership threshold for U.S.shareholders to be deemed a controlled foreign corporation.

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Jilt,a non-U.S.corporation,not resident in a treaty country,operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year.The branch increases its investments in U.S.property (its U.S.net equity) by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.8€.Wood's exchange gain or loss is:

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Foreign taxpayers earning income inside the United States.

SunCo,a U.S.corporation,owns a number of patents related to designing sunglasses.SunCo licenses these patents to unrelated parties.SpainCo,a Spanish corporation,paid SunCo $78,000 in royalties related to these licenses.SpainCo uses the patent information in its manufacturing process in its Texas plant.WiscCo,a domestic corporation,paid SunCo $32,000 in royalties related to the licenses.WiscCo uses the patent information in its manufacturing process in its Germany manufacturing plant.How much U.S.-source royalty income did SunCo earn from these licenses?

Which of the following statements is false in regard to the U.S.income tax treaty program?

Magdala is a citizen of Italy and does not have permanent resident status in the United States.During the last three years she has spent a number of days in the United States: Is Magdala treated as a U.S.resident for the current year?

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

Section 482 is used by the Treasury to:

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Describe and diagram the timeline that most businesses use to enter the international markets.