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Exam 9: Taxation of International Transactions

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Question 51

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Shannon,a foreign person with a green card,spends the following days in the United States. Shannon's residency status for 2010 is:

A) U.S.resident since she was a U.S.resident for the past immediately preceding two years.
B) U.S.resident because she has a green card.
C) Not a U.S.resident because Shannon was not in the United states for at least 31 days during 2010.
D) Not a U.S.resident since,using the three-year test,Shannon is not present in the United states for at least 183 days.

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

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Question 52

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Which of the following statements regarding the sourcing of gross income is true?

A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source.
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source.
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business.
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax.

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

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Question 53

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U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

Section 482 is used to:

Twelve unrelated U.S.persons own a foreign corporation equally.The foreign corporation is a CFC.

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

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

BrazilCo,Inc. ,a foreign corporation with a U.S.trade or business,has U.S.-source income as follows.

The source of income received for the use of intangible property is the country in which the owner of the property producing the income is resident.

During 2010,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

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

BendCo,Inc. ,a U.S.corporation,has foreign-source income and pays foreign taxes as follows. BendCo's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume 35%).What is BendCo's U.S.tax liability after the FTC?

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

BoxCo,Inc. ,a domestic corporation,owns 10% of the stock of X and of Y,two foreign corporations that are not CFCs and pay no foreign taxes.Both X and Y earn only general limitation income.During the current year,BoxCo,Inc.receives dividend income of $50,000 from X and $80,000 from Y for the tax year (all from post-2003 E & P) .BoxCo's total taxable income for the current year is $730,000.Foreign withholding taxes of $49,000 ($5,000 on the X dividend and $44,000 on the Y dividend) and U.S.taxes of $248,200 (before FTC) are levied.What is BoxCo's allowed foreign tax credit?

Which of the following statements regarding income sourcing is correct?

A nonresident alien realizes a gain on the sale of commercial real estate located in Cleveland,Ohio.The real estate was sold to his cousin who is also a nonresident alien.The seller has foreign-source income from the sale because the seller is a foreign resident.

A U.S.corporation owns 30% of a foreign corporation.The remaining 70% is owned by other foreign corporations not controlled by the U.S.corporation.The functional currency of the foreign corporation is the euro.The U.S.corporation receives a dividend equivalent to 50,000€.If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1,the exchange rate at year end is .95€: $1 and on the date of the dividend payment is 1.1€: $1,what is the result to the U.S.corporation on receipt of the dividend?

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.The U.S.corporation's U.S.tax liability before FTC is $350,000,the gross dividend income is $240,000,and worldwide taxable income is $1 million.The U.S.corporation's foreign tax credit for the taxable year is:

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 taxation under FIRPTA.