Exam 24: The Us Taxation of Multinational Transactions

Janet Mothra, a U.S. citizen, is employed by Caterpillar Corporation, a U.S. corporation. In May 2014, Caterpillar relocated Janet to its operations in Spain for the remainder of 2014. Janet was paid a salary of $200,000. As part of her compensation package for moving to Spain, Janet received a housing allowance of $40,000. Janet's salary was earned ratably over the twelve month period. During 2014 Janet worked 280 days, 168 of which were in Spain and 112 of which were in the United States. How much of Janet's total compensation is treated as foreign source income for 2014?

Which of the following income earned by a controlled foreign corporation incorporated in Spain is not foreign personal holding company income?

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.

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.

Emerald Corporation is a 100 percent owned Irish subsidiary of Shamrock, Inc., a U.S. corporation. Emerald had post-1986 earnings and profits of €2,625,000 and post-1986 foreign taxes of $525,000. During the current year, Emerald paid a dividend of €525,000 to Shamrock. The dividend was characterized as general category income for FTC purposes. The dividend was subject to a withholding tax of €26,250. Assume an exchange rate of €1 = $1.50. Shamrock reported U.S. taxable income of $1,000,000. Shamrock's U.S. tax rate is 34 percent. Compute Shamrock's net U.S. tax liability for the current year and excess FTC, if any.

Russell Starling, an Australian citizen and resident, received the following investment income during 2014: $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 in 2014?

Madrid Corporation is a 100 percent owned Spanish subsidiary of Doubloon Corporation, a U.S. corporation. Madrid had post-1986 earnings and profits of €4,200,000 and post-1986 foreign taxes of $2,700,000. During the current year, Madrid paid a dividend of €2,100,000 to Doubloon. Assume an exchange rate of €1 = $1.50. Compute the tax consequences to Doubloon as a result of this dividend.

Silverado Corporation is a 100 percent owned Mexican subsidiary of Gold Nugget Corporation, a U.S. corporation. Silverado had post-1986 earnings and profits of 350,000,000 pesos and post-1986 foreign taxes of $15,000,000. During the current year, Silverado paid a dividend of 70,000,000 pesos to Gold Nugget. Assume an exchange rate of 1 peso = 0.10 dollars. Compute the tax consequences to Gold Nugget as a result of this dividend.

Gwendolyn was physically present in the United States for 90 days in 2014, 180 days in 2013, and 30 days in 2012. Under the substantial presence test formula, how many days is Gwendolyn deemed physically present in the United States in 2014?

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?

Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. Horton had post-1986 earnings and profits of C$2,400,000 and post-1986 foreign taxes of $1,600,000. During the current year, Horton paid a dividend of C$600,000 to Cruller. The dividend was characterized as general category income for FTC purposes. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. taxable income of $2,000,000. Cruller's U.S. tax rate is 34 percent. Compute the tax consequences to Cruller as a result of this dividend.

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

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

Under most U.S. treaties, a resident of the other country must have a permanent establishment in the United States before being subject to U.S. taxation on business profits earned within the United States.

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

Austin Corporation, a U.S. corporation, received the following investment income during 2014: $50,000 of dividend income from ownership of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its 50-percent owned Irish venture, and $30,000 capital gain from sale of its stock in a Brazilian corporation. How much foreign source income does Austin have in 2014?

Vintner, S.A., a French corporation, received the following sources of income during 2014: $20,000 interest income from a loan to its 100 percent owned U.S. subsidiary $30,000 dividend income from its 100 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 in 2014?

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.

Under which of the following scenarios could Charles, a citizen of England, be eligible to claim the "closer connection" exception to the substantial presence test in 2014?