Exam 16: Ustaxation of Foreign-Related Transactions

Marcella,an alien individual,is present in the United States for 122 days this year and 122 days each in the past two years.Does she satisfy both the 31-day and 183-day requirements for U.S.Residency status?

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Question 1

Correct Answer:

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$\begin{array} { ll } \text {Yes, 31-day test: }&122 \text { days this year }>31 \text { day test } \\ \text {183 day test: this year: }& 122 \text { days } \times 1= 122.00 \text { days } \\ \text {last year: }&122 \text { days } \times 1 / 3= 40.67 \\ \text {previous year: }& 122 \text { days } \times 1 / 6= 20.33\\& 183 \text { days }\\\end{array}$

Cane Corporation owns 45% of the stock of Edmonton Airline Corporation.In its first year of operations,Edmonton Airline,a Canadian corporation,reports $400,000 of E&P and pays a $100,000 dividend to Cane Corporation.Edmonton Airline pays $50,000 in Canadian income taxes.All amounts are expressed in U.S.dollars.What is Cane Corporation's U.S.tax liability as a result of receiving the dividend? (Assume a 34% U.S.corporate tax rate. )

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Question 2

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$\begin{array} { l } \text {Dividend }&\$100,000\\ \text {Plus: deemed paid credit "gross up" }&12,500\\ \text { Gross income}&\$112,500\\ \text {Times: taxrate }&\times 0.34\\ \text {Gross tax liability }&\$38,250\\ \text {Minus: indirect credit }&(12,500)\\ \text { Net U.S. tax liability}&\$25,750\\\end{array}$

Which of the following statements is incorrect?

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Question 3

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C

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has $75,000 of sales income earned while in the United States and $30,000 of non-U.S.sales income earned while he was outside the United States.How will the income be taxed and how will the tax be collected?

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Question 4

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has $30,000 of dividend income paid by a U.S.corporation on a stock investment portfolio unrelated to his trade or business.How will the dividend be taxed and how will the tax be collected?

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Question 5

Phoenix Corporation is a controlled foreign corporation (CFC)incorporated in Country X.It is 100% owned by its U.S parent corporation.Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S.parent corporation.All widgets have the same gross profit.Sixty percent of the widgets were sold through a Country Y wholesaler that is 100% owned by Phoenix,and are destined for use in Country Y.The remaining 40% are sold through unrelated Country X wholesalers and are destined for use in Country X.What amount of profits will be constructively distributed as foreign- base company sales income to the U.S.parent company?

(Multiple Choice)

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Question 6

Identify which of the following statements is false.

(Multiple Choice)

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Question 7

A foreign corporation with a single class of stock is owned 8% by Bert,49% by Xi Yong,30% by Ernie,and 13% by Mark.Bert,Ernie,and Mark are U.S.citizens,and Xi Yong is a nonresident alien.The shareholders are not related.Is the foreign corporation a controlled foreign corporation (CFC)?

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Question 8

What are the carryback and carryforward periods for the foreign tax credit?

(Multiple Choice)

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Question 9

A foreign corporation is owned by five unrelated individuals.John,Sam,and David are U.S.citizens who own 30%,18% and 9%,respectively,of the foreign corporation's single class of stock.Alberto and Manuel are nonresident aliens who own 37% and 6%,respectively,of the foreign corporation's stock.Which of the following statements is true?

(Multiple Choice)

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Question 10

A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S.citizen or a resident alien on the last day of the tax year and both spouses consent.

(True/False)

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Question 11

Identify which of the following statements is false.

(Multiple Choice)

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Question 12

Income derived from the sale of merchandise inventory (i.e. ,final goods purchased for resale)are sourced in the country where the sale occurs.

(True/False)

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Question 13

Identify which of the following statements is false.

(Multiple Choice)

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Question 14

Identify which of the following statements is false.

(Multiple Choice)

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Question 15

Which of the following is required in order for a transaction to be considered a corporate inversion?

(Multiple Choice)

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Question 16

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in Country T.In its first year of operations,Foreign Corporation earns 60,000 frugs of E&P,pays a 40,000- frug dividend,and pays 5,000 frugs in income taxes.The exchange rate between the dollar and the frug is: first year average,1 frug = $0.20;yearend,1 frug = $0.25;tax payment date,1 frug = $0.30;and dividend payment date,1 frug = $0.28.What is the translated dividend amount?

(Multiple Choice)

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Question 17

Phoenix Corporation is a controlled foreign corporation (CFC)incorporated in Country X.It is 100% owned by its U.S.parent corporation.Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S.parent corporation.All widgets are intended for use or consumption within Country X and have the same gross profit.Sixty percent of the widgets were sold through a Country X wholesaler that is 100% owned by Phoenix,and 40% are sold through unrelated Country X wholesalers.What amount of profits will be constructively distributed as foreign-base company sales income to the U.S.parent company?

(Multiple Choice)

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Question 18

U)S.Corporation,a domestic corporation,owns all of Foreign Corporation's stock.Foreign Corporation is incorporated in France.This year,Foreign Corporation suffers a $100,000 net operating loss (NOL)in France.What amount of the $100,000 NOL can U.S.Corporation use to reduce its current-year U.S.taxable income?

(Multiple Choice)

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Question 19

Discuss the Sec.482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower-than-normal price.

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Question 20

Marcella,an alien individual,is present in the United States for 122 days this year and 122 days each in the past two years.Does she satisfy both the 31-day and 183-day requirements for U.S.Residency status?

Which of the following statements is incorrect?

Identify which of the following statements is false.

A foreign corporation with a single class of stock is owned 8% by Bert,49% by Xi Yong,30% by Ernie,and 13% by Mark.Bert,Ernie,and Mark are U.S.citizens,and Xi Yong is a nonresident alien.The shareholders are not related.Is the foreign corporation a controlled foreign corporation (CFC)?

What are the carryback and carryforward periods for the foreign tax credit?

A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S.citizen or a resident alien on the last day of the tax year and both spouses consent.

Identify which of the following statements is false.

Income derived from the sale of merchandise inventory (i.e. ,final goods purchased for resale)are sourced in the country where the sale occurs.

Identify which of the following statements is false.

Identify which of the following statements is false.

Which of the following is required in order for a transaction to be considered a corporate inversion?

Discuss the Sec.482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower-than-normal price.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

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