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Exam 13: The Us Taxation of Multinational Transactions

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Question 1

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

A) 1
B) 30
C) 183
D) 365
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
80) 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 2018, Nicole came to the United States on business and stayed for 180 days. She came to the United States again on business in 2019 and stayed for 150 days. In 2020 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 2020 under the substantial presence test?

E) A) and B)
F) A) and C)

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Question 2

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Alex, a U.S. citizen, became a resident of Belgium in 2020. Alex will no longer be subject to U.S. taxation on income he earns in Belgium if such income is exempted from tax under the U.S.-Belgium treaty.

A) True
B) False

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Question 3

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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. 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?

Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes?

The foreign tax credit regime is the primary mechanism used by the U.S. government to mitigate or eliminate the potential double taxation of income earned by U.S. individuals outside the United States.

Giselle is a citizen and resident of Brazil, a country with which the United States does not have an income tax treaty. Giselle earned $51,000 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?

Hanover Corporation, a U.S. corporation, incurred $300,000 of interest expense during the current year. Hanover manufactures inventory that is sold within the United States and abroad. The total tax book value of its production assets is $20,000,000. The total tax book value of its foreign production assets is $5,000,000. What amount of interest expense is apportioned to the company's foreign source income for foreign tax credit purposes, assuming the interest expense is fully deductible?

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:

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?

Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. During the current year, Horton paid a dividend of C$600,000 to Cruller.The dividend qualifies for the 100percent dividends received deduction. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,000,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

U.S. corporations are eligible for a foreign tax credit for withholding taxes imposed on dividends received from 100 percent owned foreign corporations, even if the dividend qualifies for the 100 percent dividends received deduction.

Obispo, Incorporated, a U.S. 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. $50,000 royalty income from its Irish subsidiary for use of a trademark within the United States. $40,000 rent income from its Dutch subsidiary for use of a warehouse located in Belgium. $3,000 capital gain from sale of stock in its 40 percent owned Mexican joint venture. Title passed in the United States. What amount of foreign source income does Obispo 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?

Which of the following foreign taxes is not creditable for U.S. tax purposes?

Windmill Corporation, a Dutch corporation, is owned by the following unrelated persons: 50 percent by a U.S. corporation, 5 percent by a U.S. individual, and 45 percent by a Swiss corporation. During the year, Windmill earned $2,000,000 of subpart F income. Which of the following statements is true about the application of subpart F to the income earned by Windmill?

All taxes paid to a foreign government by a U.S. individual are creditable on the individual's U.S. tax return.

A U.S. corporation reports its foreign tax credit computation on which tax form?

Which statement best describes the U.S. framework for determining if an individual who is not a U.S. citizen will be treated as a resident alien for U.S. tax purposes?

Boca Corporation, a U.S. corporation, received a dividend of $800,000 from its 100 percent owned Swiss subsidiary.The dividend is eligible for the 100percent dividends received deduction. A 5 percent withholding tax ($40,000) was imposed on the dividend. What amount of taxable income does the dividend generate on Boca's U.S. tax return and what is the company's net U.S. tax, assuming the company has $200,000 of U.S. source taxable income and the FTC limitation is not binding?

Philippe is a French citizen. During 2020 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2020, he will not under any circumstances be treated as a resident alien for U.S. tax purposes.