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Exam 24: The Ustaxation of Multinational Transactions

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Question 21

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Boca Corporation,a U.S.corporation,reported U.S.taxable income of $1,000,000 in the current year.Boca also received a dividend of $100,000 from the corporation's 100 percent owned subsidiary in Italy.The dividend qualifies for the 100 percent dividends received deduction.The Italian government imposed a withholding tax of $5,000 on the dividend.Compute Boca Corporation's net U.S.tax liability for the current year.

A) $231,000
B) $227,000
C) $210,000
D) $205,000

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

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Question 22

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Giselle is a citizen and resident of Brazil,a country with which the United States does not have an income tax treaty.Giselle earned $24,000 of compensation while working within the United States.She worked 60 days in the United States and 180 days in Brazil.How much of her compensation earned in the United States will be subject to U.S.tax?

A) $24,000
B) $8,000
C) $6,000
D) $0

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

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Question 23

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Pierre Corporation has a precredit U.S.tax of $315,000 on $1,500,000 of taxable income in the current year.Pierre has $300,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income.Pierre paid $60,000 of foreign income taxes on the foreign branch income and $15,000 of foreign income taxes on the passive category income.What amount of foreign tax credit (FTC) can Pierre use on its current U.S.tax return and what is the amount of the carryforward,if any?

Under most U.S.treaties,a resident of the other country must have a permanent establishment in the United States before being subject to U.S.taxation on business profits earned within the United States.

A Japanese corporation owned by 11 U.S.individuals cannot be treated as a controlled foreign corporation for U.S.tax purposes.

Portland Corporation is a U.S.corporation engaged in the manufacture and sale of fishing equipment.The company handles its export sales through sales branches in Canada and Norway.The average tax book value of Portland's assets for the year was $300 million,of which $250 million generated U.S.source income and $50 million generated foreign source income.Portland's total interest expense for the year was $24 million.What amount of interest expense can Portland apportion against its foreign source gross income for foreign tax credit purposes,assuming there is no limitation on the interest expense deduction? (Do not round intermediate calculations.Round your answer to nearest whole dollar amount.)

Orono Corporation manufactured inventory in the United States and sold the inventory to customers in Canada.Gross profit from the sale of the inventory was $300,000.Title to the inventory passed FOB: destination.How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

Rafael is a citizen of Spain and a resident of the United States.During the current year,Rafael received the following income: Compensation of $5 million from competing in tennis matches in the U.S. Cash dividends of $10,000 from a Spanish corporation that earns 50 percent of its income from sales in the United States Interest of $2,000 from a Spanish citizen who is a resident of the U.S. Rent of $5,000 from U.S.residents who rented his villa in Italy Gain of $10,000 on the sale of stock in a German corporation Determine the source (U.S.or foreign)of each item of income Rafael received.

Natsumi is a citizen and resident of Japan.She has a full-time job in Japan and has lived there with her family for the past 20 years.In 2017,Natsumi came to the United States on business and stayed for 240 days.She came to the United States again on business in 2018 and stayed for 120 days.In 2019 she came back to the United States on business and stayed for 120 days.Does Natsumi meet the U.S.statutory definition of a resident alien in 2019 under the substantial presence test?

Rainier Corporation,a U.S.corporation,manufactures and sells quidgets in the United States and Europe.Rainier conducts its operations in Europe through a German GmbH,which the company elects to treat as a branch for U.S.tax purposes.Rainier also licenses the rights to manufacture quidgets to an unrelated company in China.During the current year,Rainier paid the following foreign taxes,translated into U.S.dollars at the appropriate exchange rate: What amount of creditable foreign taxes does Rainier incur?

Under a U.S.treaty,what must a non-resident corporation create in the United States before it is subject to U.S.taxation on its business profits?

Vintner,S.A.,a French corporation,received the following sources of income: $20,000 interest income from a loan to its 100 percent owned U.S.subsidiary $30,000 dividend income from its 5 percent owned Canadian subsidiary $100,000 royalty income from its Irish subsidiary for use of a trademark within the United States $100,000 rent income from its Mexican subsidiary for use of a warehouse located in Arizona $50,000 capital gain from sale of stock in its 40 percent owned German joint venture.Title passed in the United States. What amount of U.S.source income does Vintner have?

Philippe is a French citizen.During 2019 he spent 150 days in the United States on business.Because Philippe does not spend 183 days in the United States in 2019,he will not under any circumstances be treated as a resident alien for U.S.tax purposes.

"Outbound taxation" deals with the U.S.tax rules that apply to U.S.persons doing business outside the United States.

Bismarck Corporation has a precredit U.S.tax of $210,000 on $1,000,000 of taxable income in the current year.Bismarck has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign source taxable income characterized as passive category income.Bismarck paid $80,000 of foreign income taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income.What amount of foreign tax credit (FTC) can Bismarck use on its current-year U.S.tax return and what is the amount of the carryforward,if any?

Ames Corporation has a precredit U.S.tax of $210,000 on $1,000,000 of taxable income.Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the U.K.government on this income.All of the foreign source income is treated as foreign branch income for foreign tax credit purposes.Ames's foreign tax credit on its tax return will be:

Gouda,S.A.,a Belgian corporation,received the following sources of income: $10,000 interest income from a loan to its 100 percent owned Dutch subsidiary $20,000 dividend income from its 100 percent owned U.S.subsidiary $30,000 royalty income from its Irish subsidiary for use of a trademark outside the United States $40,000 rent income from its Canadian subsidiary for use of a warehouse located in Wisconsin $5,000 capital gain from sale of stock in its 40 percent owned New Zealand joint venture.Title passed in New Zealand. What amount of U.S.source income does Gouda have?

What form is used by a U.S.corporation to "check the box" to elect the U.S.tax consequences of forming a hybrid entity outside the United States?

Portsmouth Corporation,a British corporation,is a wholly owned subsidiary of Salem Corporation,a U.S.corporation.During the year,Portsmouth reported the following income: $250,000 interest income received from a loan to an unrelated French corporation. $100,000 dividend income received from a less than 1 percent owned unrelated Dutch corporation. $150,000 rent income from an unrelated British corporation on property Portsmouth actively manages. $500,000 gross profit from the sale of inventory manufactured by Portsmouth in Great Britain and sold to a 100 percent owned subsidiary in Germany. What amount of subpart F income does Portsmouth recognize in the current year?

A non-U.S.citizen with a green card will always be treated as a resident alien for U.S.tax purposes regardless of the number of days she spends in the United States during the current year.