Exam 24: The Us Taxation of Multinational Transactions

A non U.S. citizen with a green card will always be treated as a resident alien for U.S. tax purposes regardless of the number of days she spends in the United States during the current year.

Subpart F income earned by a CFC will always be treated as a deemed dividend to the CFC's U.S. shareholders in the year the subpart F income is earned.

Wooden Shoe Corporation is a 100 percent owned Dutch subsidiary of Tulip Corporation, a U.S. corporation. Wooden Shoe had post-1986 earnings and profits of €3,000,000 and post-1986 foreign taxes of $1,000,000. During the current year, Wooden Shoe paid a dividend of €300,000 to Tulip. Assume an exchange rate of €1 = $1.40. No withholding tax was imposed on the dividend. What amount of taxable income does the dividend generate on Tulip's U.S. tax return?

Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary. For foreign tax credit purposes, the dividend will always be characterized as passive category income.

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?

Jimmy Johnson, a U.S. citizen, is employed by General Motors Corporation, a U.S. corporation. In June 2014, General Motors relocated Jimmy to its operations in Germany for the remainder of 2014. Jimmy was paid a salary of $250,000. As part of his compensation package for moving to Germany, Jimmy received a cost of living allowance of $30,000, which was paid to him only while he worked in Germany. Jimmy's salary was earned ratably over the twelve month period. During 2014 Jimmy worked 260 days, 130 of which were in Germany and 130 of which were in the United States. How much of Jimmy's total compensation is treated as foreign source income for 2014?

Philippe is a French citizen. During 2014 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2014, he will not be treated as a resident alien for U.S. tax purposes.

Rainier Corporation, a U.S. corporation, manufactures and sells quidgets in the United States and Europe. Rainier conducts its operations in Europe through a German GmbH, which the company elects to treat as a branch for U.S. tax purposes. Rainier also licenses the rights to manufacture quidgets to an unrelated company in China. During the current year, Rainier paid the following foreign taxes, translated into U.S. dollars at the appropriate exchange rate: $\begin{array} { |c|c|} \hline { \text { Foreign Taxes } } & \text { Amount (in \$) } \\\hline \text { National income taxes in Germany } & 1,500,000 \\\hline \text { City of Munich income taxes } & 200,000 \\\hline \text { Value-added tax to German government } & 400,000 \\\hline \begin{array} { l } \text { Payroll tax (employer's share of social insurance } \\\text { contributions) to German government }\end{array} & 300,000 \\\hline \text { Withholding tax on royalties received from China } & 100,000 \\\hline\end{array}$ What amount of creditable foreign taxes does Rainier incur?

Which of the following statements best describes how the deemed paid credit is computed by a U.S. corporation.

Flint Steel Corporation has a precredit U.S. tax of $170,000 on $500,000 of taxable income in 2014. Flint has $200,000 of foreign source taxable income and paid $80,000 of income taxes to the German government on this income. All of the foreign source income is treated as general category income for foreign tax credit purposes. Flint's foreign tax credit on its 2014 tax return will be:

Ames Corporation has a precredit U.S. tax of $340,000 on $1,000,000 of taxable income in 2014. Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the Australian government on this income. All of the foreign source income is treated as general category income for foreign tax credit purposes. Ames's foreign tax credit on its 2014 tax return will be:

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. No withholding 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 34 percent.

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?

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 2012, Nicole came to the United States on business and stayed for 180 days. She came to the United States again on business in 2013 and stayed for 150 days. In 2014 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 2014 under the substantial presence test?

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 2012, Natsumi came to the United States on business and stayed for 240 days. She came to the United States again on business in 2013 and stayed for 120 days. In 2014 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 2014 under the substantial presence test?

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 United States government to mitigate or eliminate the potential double taxation of income earned by U.S. persons outside the United States.

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

Which statement best describes the U.S. framework for taxing multinational transactions?

Which of the following is not a benefit derived from an income tax treaty between the United States and another country?