Exam 16: Ustaxation of Foreign-Related Transactions

Ashley,a U.S.citizen,works in England for part of the year.She earns $40,000 in England,paying $10,000 in income taxes to the British government.Her U.S.income is $60,000 and she pays $12,000 in U.S.taxes.Her U.S.taxes on her worldwide income are $20,000.What is Ashley's excess foreign tax credit? Assume she does not qualify for the foreign-earned income exclusion.

What is a corporate inversion and why was this provision enacted?

Which of the following statements regarding inversions is incorrect?

What is the branch profits tax? Explain the Congressional intent behind its enactment.

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.

Which of the following statements is incorrect?

A taxpayer may make the election to either deduct or take a credit for foreign income taxes

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.Bert is Ernie's son.Is the foreign corporation a controlled foreign corporation (CFC)?

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?

Domestic corporation B owns 200 of the 400 outstanding shares of foreign corporation K's stock.U.S.citizen R owns the remaining K stock.The domestic corporation held the stock for 40 days two years ago,365 days last year,and 80 days this year.None of K's income is Subpart F income.The foreign corporation has E&P of $50,000 for each of the three years in question.None of the years is a leap year.On the 80th day of the current year,the stock is sold by B to R in a transaction in which a $100,000 gain is recognized by B.What part of B's gain is capital gain?

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

A U.S.citizen accrued $120,000 of creditable foreign taxes last year.The citizen's foreign tax credit limitation for last year is $90,000 (only a single limitation need be calculated).The excess foreign tax credit limitation for the year preceding the year in which the excess foreign taxes were incurred is $2,000.A similar $2,000 excess foreign tax credit limitation position is expected in each of the next 10 years.What portion of the excess foreign taxes can be expected to be noncreditable because of the foreign tax credit limitation?

Identify which of the following statements is false.

A foreign corporation with a single class of stock is owned equally by Jericho Corporation,a U.S.corporation,and Joshua,a U.S.citizen.Joshua owns no Alpha Corporation stock.Is the foreign corporation a controlled foreign corporation (CFC)?

Music Corporation is a CFC incorporated in Country M.Music receives interest and dividends from its two foreign subsidiary corporations,Sharp Corporation and Flat Corporation.Sharp is incorporated in Country S and conducts all of its activities in that country.Flat is incorporated in Country M and conducts all of its activities in that country.Are the interest and dividends received by Music Corporation FPHCI?

U)S.Corporation,a domestic corporation,owns all of Foreign Corporation's stock.Foreign Corporation is incorporated in France.This year,Foreign Corporation reports $100,000 in aftertax profits in France,none of which is Subpart F income.U.S.Corporation

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?