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Exam 25: Taxation of International Transactions

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Question 71

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Arendt,Inc.,a U.S.corporation,purchases a piece of equipment for use in its manufacture of custom pianos.The equipment is acquired in Ireland at a cost of 200,000 euros when 1€: $1.25.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1€: $1.15.What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss,if any?

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No foreign currency exchange gain or los...

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Question 72

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During Year 4,Josita,an NRA,receives interest income of $50,000 from Talmadge,Inc.,an unrelated U.S.corporation.Considering the following facts related to Talmadge's operations,what is the source of the interest income received by Josita?

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Talmadge meets the 80% active foreign bu...

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Question 73

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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.

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

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 the U.S.taxation of non-U.S.persons is true?

Discuss the primary purposes of income tax treaties.

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.

Which of the following statements regarding the translation of foreign income taxes is true?

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?

Match the definition with the correct term. a.Expatriate b.Resident c.Nonresident alien d.U.S. trade or business e.Branch profits tax f.Effectively connected income -An individual who gives up U.S.citizenship to avoid U.S.income taxes.

Luisa,a non-U.S.person with a green card,spends the following days in the United States. Luisa's residency status for Year 3 is:

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

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?

SilverCo,a U.S.corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.SilverCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain or loss,if any,is recognized as a result of this transaction?

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.

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 -Method for sourcing income and deductions.

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 -Ownership percentage required before a deemed paid foreign tax credit is allowed.

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.

When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.