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Exam 9: Taxation of International Transactions

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Question 81

Multiple Choice

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ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo has historically earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

A) $0.
B) $10,500.
C) $39,500.
D) $50,000.

E) A) and C)
F) None of the above

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Question 82

Multiple Choice

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Miles,Ltd. ,a foreign corporation,has a U.S.branch that earns effectively connected earnings and profits (after income taxes) of $600,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $2 million and at the end of the tax year is $2,800,000.Miles is in a nontreaty country.Miles' branch profits tax for the year is:

A) $0.
B) $180,000.
C) $600,000.
D) $2,800,000.

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

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Question 83

Multiple Choice

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A U.S.corporation owns a German corporation.The U.S.corporation receives a dividend (non-Subpart F income) of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.80€.The U.S.corporation's exchange gain or loss is:

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

Monika,a nonresident alien,is employed by GlobalCo,a foreign corporation.Monika works in the United States for 32 days during the year,receiving a gross salary of $2,900 for this period.GlobalCo is not engaged in a U.S.trade or business.Under the "commercial traveler" exception,the $2,900 is not classified as U.S.-source income.

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?

U.S.individuals that receive dividends from foreign corporations may not claim the deemed-paid foreign tax credit related to such dividends.

Miles is a citizen of France and does not have permanent resident status in the United States.During the last three years he has spent a number of days in the United States. Is Miles treated as a U.S.resident for the current year?

Rufus,Inc. ,a domestic corporation,has worldwide taxable income of $800,000,including a $300,000 dividend from Emma,Inc. ,a § 902 noncontrolled foreign corporation.Rufus' U.S.tax liability before FTC is $280,000.Rufus owns 20% of Emma.Emma's post-1986 E & P after taxes is $8 million and it has paid foreign taxes of $5 million attributable to post-1986 E & P.If Rufus elects the FTC,its U.S.gross income with regard to the dividend from Emma is:

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

Arendt,Inc. ,a domestic corporation,purchases a piece of equipment for use in its manufacture of custom pianos.The equipment is acquired in Ireland at a cost of 200,000 euros when 1 euro: $1.25.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1 euro: $1.15.What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss,if any?

Income from international communications activities earned by a U.S.person is sourced 100% in the United States.

Benchmark,Inc. ,a U.S.shareholder owns 100% of a CFC from which Benchmark receives a $3 million cash distribution.The CFC's E & P is composed of the following amounts. Benchmark recognizes a taxable dividend of: