Exam 16: US Taxation of Foreign-Related Transactions

Alan, a U.S.citizen, works in Germany and earns $70,000, paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's excess foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

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 $30,000 of dividend income paid by a U.S.corporation on a stock investment portfolio unrelated to his trade or business.How will the dividend be taxed and how will the tax be collected?

What are the five major income categories that are taxed under the Subpart F rules? Explain the concept of Subpart F income.

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

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)?

Overseas business activities conducted by U.S.corporations receive which one of the following favorable tax breaks?

Identify which of the following statements is true.

Domestic corporation X owns all the stock of controlled foreign corporation (CFC)T.X's acquisition cost for the CFC investment is $150,000.The CFC reports E&P of $200,000 since the domestic corporation acquired its interest, of which $120,000 was Subpart F income.The CFC makes a cash distribution of $90,000 to the domestic corporation.What is the domestic corporation's basis for its investment in T immediately after the cash distribution?

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?

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in France.During the current year, Foreign Corporation reports $100,000 of E&P, pays $30,000 in foreign income taxes, and remits $40,000 of dividends ratably to its shareholders.In prior post-1986 tax years, Foreign Corporation reported $60,000 of E&P, paid foreign income taxes of $20,000, and paid no dividends.What is U.S.Corporation's deemed paid foreign tax credit for the current-year dividend?

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?

Identify which of the following statements is true.

Phoenix Corporation is a controlled foreign corporation (CFC)incorporated in Country X.It is 100% owned by its U.S.parent corporation.Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S.parent corporation.All widgets are intended for use or consumption within Country X and have the same gross profit.Sixty percent of the widgets were sold through a Country X wholesaler that is 100% owned by Phoenix, and 40% are sold through unrelated Country X wholesalers.What amount of profits will be constructively distributed as foreign-base company sales income to the U.S.parent company?

Cane Corporation owns 45% of the stock of Edmonton Airline Corporation.In its first year of operations, Edmonton Airline, a Canadian corporation, earns $400,000 of E&P and pays a $100,000 dividend to Cane Corporation.Edmonton Airline pays $50,000 in Canadian income taxes.All amounts are expressed in U.S.dollars.What is Cane Corporation's deemed paid foreign tax credit for the dividend?

Nonresident aliens are not allowed to claim the standard deduction.

Compare the U.S.tax treatment of a nonresident alien and a resident alien, both of whom earn U.S.trade or business and U.S.investment income.

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

Julia, an accrual-method taxpayer, is a U.S.citizen and a resident of a foreign country.Her tax year for both countries is a calendar year.Julia accrues 50,000 coras for the foreign country tax liability on December 31 of last year when the exchange rate is one cora = $1.Julia pays the tax to the foreign country on its due date, March 1 of the current year.The exchange rate on that date is one cora = $1.50.( Julia files her U.S.tax return for last year on April 15 of the current year when the exchange rate is one cora = $2.Julia's foreign tax credit is

For the foreign credit limitation calculation, income derived from the sale of inventory which is produced by the seller, is considered earned

What are the consequences of classification as a corporate inversion?