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Exam 25: Taxation of International Transactions

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Question 1

True/False

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The transfer of the assets of a foreign branch (of a U.S.corporation)to a newly formed foreign corporation is always tax deferred under § 351.

A) True
B) False

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Question 2

Multiple Choice

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Which of the following statements regarding the U.S.taxation of foreign persons is true?

A) A foreign person's effectively connected income is subject to U.S.income taxation.
B) A foreign person's effectively connected income is tax free unless it is also characterized as FDAP income.
C) A foreign person may earn income from U.S.real property without incurring any U.S.income tax.
D) A foreign person must spend at least 183 days in the United States before any effectively connected income is subject to U.S.taxation.

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

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Question 3

Multiple Choice

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Which of the following determinations requires knowing the amount of one's foreign-source gross income?

USCo has foreign-source income from a manufacturing operation,from sales of the manufactured goods,and from stocks and bonds held for investment.How many categories or "baskets" of income does USCo have for foreign tax credit limitation purposes?

Mark,Inc. ,a U.S.corporation,operates an unincorporated branch manufacturing operation in Germany.Mark,Inc. ,reports $100,000 of taxable income from the German branch on its U.S.tax return along with $400,000 of taxable income from its U.S.operations.Mark paid $40,000 in German income taxes related to the $100,000 in branch income.Assuming a U.S.tax rate of 35%,what is Mark's U.S.tax liability after any allowable foreign tax credits?

SunCo,a domestic corporation,owns a number of patents related to designing sunglasses.SunCo licenses these patents to unrelated parties.SpainCo,a Spanish corporation,paid SunCo $78,000 in royalties related to these licenses.SpainCo uses the patent information in its manufacturing process in its Texas plant.WiscCo,a domestic corporation,paid SunCo $32,000 in royalties related to the licenses.WiscCo uses the patent information in its manufacturing process in its German manufacturing plant.How much foreign-source royalty income did SunCo earn from these licenses?

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:

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?

Sang,an NRA who was not a resident of a treaty country,receives taxable dividends of $80,000 from a domestic corporations.Sang does not have a U.S.trade or business.The dividends are taxed by the United States through withholding by the payor of:

The following persons own Good Corporation,a foreign corporation. None of the shareholders are related.Subpart F income for the tax year is $200,000.No distributions are made.Which of the following statements is correct?

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

Which of the following income items does not represent Subpart F income if earned by a CFC?

Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

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

Hickman,Inc. ,a U.S.corporation,operates an unincorporated branch manufacturing operation in the United Kingdom.Hickman,Inc. ,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return along with $1,300,000 of taxable income from its U.S.operations.Hickman paid $270,000 in U.K.income taxes related to the $900,000 in branch income.Assuming a U.S.tax rate of 35%,what is Hickman's U.S.tax liability after any allowable foreign tax credits?

The United States has income tax treaties with only members of the European Union.

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

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.

Which of the following transactions by a U.S.corporation may result in taxation under § 367.

ForCo,a foreign 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 foreign base company sales income.