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Exam 16: Multijurisdictional Taxation

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Question 51

True/False

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The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

A) True
B) False

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Question 52

Multiple Choice

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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 foreign tax credit related to the Starke dividend?

A) $22,500
B) $56,250
C) $150,000
D) $750,000

E) C) and D)
F) A) and D)

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Question 53

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General Corporation is taxable in a number of states.This year,General made a $100,000 sale from its A headquarters to a customer in B.This activity is not sufficient for General to create nexus with B.State B applies a throwback rule,but State A does not.In which state(s) will the sale be included in the sales factor numerator?

Unused foreign tax credits are carried back two years and then forward 20 years.

Freda was born and continues to live in Uruguay.She exports widgets to U.S.customers.The U.S.does not have in force an income tax treaty with Uruguay.Freda's net U.S.income from the widgets is subject to a flat 30% Federal income tax rate.

Chipper,Inc. ,a U.S.corporation,reports worldwide taxable income of $1 million,including a $300,000 dividend from Emma,Inc. ,a foreign corporation.Chipper's U.S.tax liability before FTC is $340,000.Chipper owns 20% of Emma.Emma's E & P after taxes is $8 million and it has paid foreign taxes of $2 million attributable to that E & P.If Chipper elects the FTC,its U.S.gross income with regard to the dividend from Emma is:

USCo,a U.S.corporation,reports worldwide taxable income of $500,000,including a $100,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $1 million and it has paid $200,000 of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in the state,such as entities with in-state headquarters.

General Corporation is taxable in a number of states.This year,General made a $100,000 sale from its A headquarters to an agency of the U.S.government.State A applies a throwback rule.In which state(s) will the sale be included in the sales factor numerator?

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

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

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

Typically,corporate income taxes constitute about 20 percent of a state's annual tax collections.

Which of the following foreign taxes paid by a U.S.corporation may be eligible for the foreign tax credit?

ForCo,a non-U.S.corporation based in Aldonza,purchases widgets from USCo,Inc. ,its U.S.parent corporation.The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza.The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Which of the following is not a U.S.person?

USCo,a U.S.corporation,reports worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

ForCo,a subsidiary of a U.S.corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

Under P.L.86-272,the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice.In what areas might your Federal income tax knowledge also be applicable in your new assignment?