Exam 24: The Us Taxation of Multinational Transactions

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

Pierre Corporation has a precredit U.S. tax of $315,000 on $1,530,000 of taxable income in the current year. Pierre has $306,000 of foreign source taxable income characterized as foreign branch income and $153,000 of foreign source taxable income characterized as passive category income. Pierre paid $63,000 of foreign income taxes on the foreign branch income and $21,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC)can Pierre use on its current U.S. tax return and what is the amount of the carryforward, if any?

Natsumi is a citizen and resident of Japan. She has a full-time job in Japan and has lived there with her family for the past 20 years. In 2018, Natsumi came to the United States on business and stayed for 240 days. She came to the United States again on business in 2019 and stayed for 120 days. In 2020 she came back to the United States on business and stayed for 120 days. Does Natsumi meet the U.S. statutory definition of a resident alien in 2020 under the substantial presence test?

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.

To be eligible for the "closer connection" exception to the physical presence test, an individual must be in the United States for less than how many days?

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.

Ypsi Corporation has a precredit U.S. tax of $420,378 on $2,001,800 of taxable income in the current year. Ypsi has $418,000 of foreign source taxable income characterized as foreign branch income and $151,800 of foreign source taxable income characterized as passive category income. Ypsi paid $100,000 of foreign income taxes on the foreign branch income and $30,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC)can Ypsi use on its U.S. tax return and what is the amount of the FTC carryforward, if any? (Do not round intermediate calculations. Round your answer to nearest whole dollar amount.)

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:

Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,000 of dividend income from ownership of stock in a U.S. corporation, $10,000 interest from a certificate of deposit in a U.S. bank, $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,000 capital gain from sale of a stock in a U.S. corporation. How much of Russell's income will be subject to U.S. taxation?

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

Which of the following items of foreign source income is classified as passive category income for foreign tax credit purposes?

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?

Bismarck Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in the current year. Bismarck has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign source taxable income characterized as passive category income. Bismarck paid $80,000 of foreign income taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC)can Bismarck use on its current-year U.S. tax return and what is the amount of the carryforward, if any?

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

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.

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

A hybrid entity established in Ireland is treated as a flow-through entity for U.S. tax purposes and a corporation for Irish tax purposes.

Appleton Corporation, a U.S. corporation, reported total taxable income of $10,000,000 in the current year. 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 foreign branch income. Appleton paid U.K. income taxes of $500,000 on its branch income. Compute Appleton's net U.S. tax liability and any foreign tax credit carryover.

Manchester Corporation, a U.S. corporation, incurred $100,000 of interest expense during the current year. Manchester manufactures inventory that is sold within the United States and abroad. The total tax book value of its U.S. 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 in the current year?

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?