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Exam 24: The US Taxation of Multinational Transactions

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Question 31

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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 10 percent owned subsidiary in Germany.What amount of subpart F income does Portsmouth recognize in the current year?

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$350,000
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Question 32

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Marcel, a U.S. citizen, receives interest income from bonds issued by a Dutchcorporation. The interest income will be considered U.S. source income for U.S. tax purposes.

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Question 33

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Rafael is a citizen of Spain and a resident of the United States. During 2017, 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 theUnited 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 in 2017.

Hanover Corporation, a U.S. corporation, incurred $300,000 of interest expense during2017. Hanover manufactures inventory that is sold within the United States and abroad. The total tax book value and fair market value of its production assets is $20,000,000 and $60,000,000, respectively. The total tax book value and fair market value of itsforeign production assets is $5,000,000 and $20,000,000, respectively. What is the minimum amount of interest expense that can be apportioned to the company's foreign source income for foreign tax credit purposes, assuming this is the first year the company makes this computation?

Before subpart F applies, a foreign corporation must be a CFC for how many consecutive days?

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. Under the 50/50 method, how much of the gross profit is treated as foreign source income for purposes of computing the corporation'sforeign tax credit in the current year?

Austin Corporation, a U.S. corporation, received the following investment income during 2017: $50,000 of dividend income from ownership of stock in a Frenchcorporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its50-percent owned Irish venture, and $30,000 capital gain from sale of its stock in aBrazilian corporation. How much foreign source income does Austin have in 2017?

Provo Corporation received a dividend of $350,000 from its 100 percent owned German subsidiary. A deemed paid credit of $150,000 was available on the dividend. Nowithholding tax was imposed on the dividend. What are the U.S. tax consequences to Provo on receipt of the dividend, assuming the foreign tax credit limitation is not binding and the company breaks even on its U.S. operations? Assume a U.S. tax rate of 34percent.

All income earned by a Swiss corporation owned by a U.S. corporation is deferred fromU.S. taxation until such income is remitted back to the United States.

A deemed paid credit is available on which of the following dividends received by a U.S. corporation?

Nicole is a citizen and resident of Australia. She has a full-time job in Australia and has lived there with her family for the past 10 years. In 2015, Nicole came to the United States on business andstayed for 180 days. She came to the United States again on business in 2016 and stayed for 150 days. In 2017 she came back to the United States on business and stayed for 100 days. Does Nicole meet the U.S. statutory definition of a resident alien in 2017 under the substantial presence test?

A rectangle with a triangle within it is a symbol used to represent what organizational form?

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

Amy is a U.S. citizen. During the year she earned income from an investment in a Frenchcompany. Amy will be subject to U.S. taxation on her income under the principle of source-based taxation.

Camellia Corporation, a U.S. corporation, incurred $600,000 of research andexperimental (R&E) expenses during 2017. Camellia sells inventory within the United States and abroad. Camellia conducted all of the research related to the inventory within the United States. Gross sales of the inventory were $20,000,000, of which $12,000,000 was from foreign source sales. Gross profit from sale of the inventory was $8,000,000, of which $2,000,000 was from foreign source sales. What is the minimum amount of R&E expense that can be apportioned to the company's foreign source income for foreign tax credit purposes, assuming this is the first year the company makes this computation?

The gross profit from a sale of inventory manufactured in the United States and sold inSpain will always be treated as 100 percent U.S. source income.

Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $200,000. Title to the inventory passed FOB: shipping point. Under the 50/50 method, 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?

Appleton Corporation, a U.S. corporation, reported total taxable income of $10,000,000 in 2017.Taxable income included $2,500,000 of foreign source taxable income from the company's branch operations in the United Kingdom. All of the branch income is general category income. Appleton paid U.K. income taxes of $750,000 on its branch income. Compute Appleton's net U.S. tax liability and any foreign tax credit carryover for 2017. Assume a U.S. corporate tax rate of 34%.

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?

Gouda, S.A., a Belgium corporation, received the following sources of income during 2017:$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 NewZealand.What amount of U.S. source income does Gouda have in 2017?