Exam 13: The Us Taxation of Multinational Transactions

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?

Which statement best describes the U.S. framework for taxing non-U.S. persons on income earned from U.S. sources?

Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary. The dividend is eligible for the 100 percent dividends received deduction. Any income taxes paid to a Spanish taxing authority will be creditable on the U.S. tax return.

The United States generally taxes U.S. source fixed and determinable, annual or periodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income.

Holmdel, Inc., a U.S. corporation, received the following sources of income: $10,000 interest income from a loan to its 100 percent owned Swiss subsidiary $50,000 dividend income from its 5 percent owned French subsidiary $100,000 royalty income from its Bermuda subsidiary for use of a trademark outside the United States $25,000 rent income from its Canadian subsidiary for use of a warehouse located in New Jersey $50,000 capital gain from sale of stock in its 40 percent owned Japanese joint venture. Title passed in Japan. What amount of foreign source income does Holmdel have?

Gwendolyn was physically present in the United States for 90 days in 2019, 180 days in 2018, and 30 days in 2017. Under the substantial presence test formula, how many days is Gwendolyn deemed physically present in the United States in 2019?

Spartan Corporation, a U.S. company, manufactures widgets for sale in the United States and Europe. All manufacturing activities take place in the United States. During the current year, Spartan sold 100,000 widgets to European customers at a price of $5 each. Each widget costs $2 to produce. All of Spartan's production assets are located in the United States. Spartan ships its widgets FOB, place of destination. What amount of Spartan's gross profit is treated as coming from foreign sources?

A U.S. corporation can use hybrid entities to avoid the application of subpart F to cross-border payments made between wholly owned entities outside the United States.

Which of the following expenses incurred by a U.S. corporation is not subject to special apportionment rules for foreign tax credit purposes?

Which of the following tax benefits does not arise when a U.S. corporation forms a corporation in Ireland through which to earn business profits in Ireland?

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?

Reno Corporation, a U.S. corporation, reported total taxable income of $6,000,000 in the current year. Taxable income included $1,800,000 of foreign source taxable income from the company's branch operations in Canada. All of the branch income is foreign branch income. Reno paid Canadian income taxes of $450,000 on its branch income. Compute Reno's net U.S. tax liability and any foreign tax credit carryover. Assume an exchange rate of C$1 = $1.

Deductible interest expense incurred by a U.S. corporation will always be treated as a U.S. source deduction.

Which of the following statements best describes the operation of subpart F as it applies to income earned by a foreign corporation?

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.

Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark?

The Canadian government imposes a withholding tax of 15 percent on a dividend paid by a Canadian corporation to a U.S. individual. The withholding tax will be creditable on the individual's U.S. tax return as an "in lieu of" tax.

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?

Guido was physically present in the United States for 150 days in 2019, 120 days in 2018, and 90 days in 2017. Under the substantial presence test formula, how many days is Guido deemed physically present in the United States in 2019?

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