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Exam 25: Taxation of International Transactions

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Question 51

Multiple Choice

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Which of the following would not prevent an alien without a "green card" from being classified as a U.S.resident for income tax purposes?

A) The individual was prevented from leaving the United States due to an illness which arose while in the United States.
B) The individual commutes daily from Mexico to the United States to work.
C) The individual is a foreign consul assigned to the United States.
D) The individual was in the United States to oversee her investments.

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

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Question 52

Multiple Choice

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The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates.

A) FIRPTA gains.
B) Capital gains effectively connected with a U.S.trade or business.
C) Net long-term capital gains, where no U.S.trade or business exists.
D) Fixed, determinable, annual or periodic (FDAP) income effectively connected with a U.S.trade or business.

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

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Question 53

True/False

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A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

Match the definition with the correct term.

A controlled foreign corporation (CFC) realizes Subpart F income from:

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

Which of the following is a principle used in applying income sourcing under U.S.rules?

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

Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

RainCo, a domestic corporation, owns a number of patents related to designing umbrellas.RainCo licenses these patents to unrelated parties.TexCo, a domestic corporation, paid RainCo $100,000 in royalties related to these licenses.TexCo uses the patent information in its manufacturing process in its Canadian plant.IrishCo, an Irish corporation, paid RainCo $25,000 in royalties related to the licenses.IrishCo uses the patent information in its manufacturing process in its Michigan manufacturing plant.How much U.S.-source royalty income did RainCo earn from these licenses?

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

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?

Twenty unrelated U.S.persons equally own all of the stock of Quigley, a foreign corporation.Quigley is a CFC.

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:

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

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

Jokerz, a CFC of a U.S.parent, generated $80,000 of 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 $80,000 in the first year and $50,000 in the second year.

Goolsbee, Inc., a domestic 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.