Deck 16: U.S. Taxation of Foreign-Related Transactions

Question 1

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 foreign tax credit? Assume he does not qualify for the foreign- earned income exclusion.

A) $20,000
B) $12,000
C) $14,318
D) none of the above

Answer 1

C

Question 2

Karen, a U.S. citizen, earns $40,000 of taxable income from U.S. sources, $20,000 in taxable wages from Country A and $20,000 in taxable interest from Country B. The U.S. tax rate is 25%. The tax on Country A income is $8,000, and Country B charges no tax on the interest income. Assuming two baskets are needed for the two types of income because the interest is passive income, Karen's foreign tax credit that can be claimed is

A) $10,000.
B) $20,000.
C) $5,000.
D) none of the above

Answer 2

C

Question 3

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

A) where the seller is a resident.
B) where the sale occurs.
C) where production occurs.
D) every country of manufacture on a pro- rata allocation basis.

Answer 3

D

Question 4

U.S. citizens and resident aliens working abroad may qualify for the foreign- earned income exclusion of $103,900 in 2018.

Question 5

Identify which of the following statements is true.

A) When a taxpayer reports excess foreign tax credits in more than one year, the excess credits are used in a last- in- first- out (LIFO) manner.
B) Foreign taxes paid in excess of the foreign tax credit limitation can be carried back to the previous three tax years and then carried over to the succeeding five tax years.
C) Dividends generally are considered to be earned in the distributing corporation's country of incorporation.
D) All of the above are false.

Question 6

U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates.

Question 7

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.

A) $2,000
B) $4,000
C) $0
D) none of the above

Question 8

Which of the following characteristics is not used by the U.S. government to determine the tax treatment accorded foreign- related transactions?

A) the taxpayer's country of citizenship
B) the type of income earned
C) the taxpayer's type of business
D) the taxpayer's country of residence

Question 9

Identify which of the following statements is false.

A) Itemized deductions are allocated between U.S. and foreign- source income.
B) An accrual- basis taxpayer must make an adjustment to their foreign tax credit which reflects the change in exchange rates between the accrual date and the payment date.
C) Income from the sale of personal property (other than inventory) by a U.S. resident is considered earned in the country where the personal property is delivered.
D) Dividend income received by a U.S. individual from a foreign corporation earning nearly all of its income from outside the United States is foreign- source income.

Question 10

Identify which of the following statements is true.

A) Nonresident aliens and foreign corporations are not subject to U.S. taxation on their non- U.S. source investment income and part or all of their non- U.S. source trade or business income.
B) In a particular year, the overall foreign tax credit limitation permits a taxpayer to offset "excess" foreign taxes paid in one country against "excess" limitation amounts originating in other countries.
C) U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates.
D) All of the above are true.

Question 11

What are the carryback and carryforward periods for the foreign tax credit?

A) back one year; forward ten years
B) back three years; forward ten years
C) back two years; forward twenty years
D) back two years; forward five years

Question 12

A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period and maintains a tax home there has satisfied the bona fide foreign resident test.

Question 13

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?

A) $8,000
B) $2,000
C) $0
D) none of the above

Question 14

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 taxes on her worldwide income are $20,000. What is Ashley's foreign tax credit? Assume she does not qualify for the foreign- earned income exclusion.

A) $10,000
B) $8,000
C) $12,000
D) none of the above

Question 15

If foreign taxes on foreign income exceed U.S. taxes on foreign income, the excess foreign taxes are credited against U.S. taxes in the current year.

Question 16

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

A) $75,000.
B) $50,000.
C) $100,000.
D) none of the above

Question 17

Excess foreign taxes in one basket cannot offset limitation amounts in another basket.

Question 18

Excess foreign tax credits can be carried back one year and forward five years.

Question 19

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

Question 20

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.

A) $5,682
B) $8,000
C) $0
D) none of the above

Question 21

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

A) The nonresident alien's U.S. tax rate is 30% unless reduced by a tax treaty.
B) The domestic corporation must withhold the U.S. taxes from the alien's dividend payment.
C) The nonresident alien must pay estimated taxes on the dividend income at a 30% rate.
D) The 30% tax rate is applied against gross income.

Question 22

Income is "effectively connected" with the conduct of a U.S. business only if

A) the asset- use test is met.
B) activities of the U.S. business are a material factor in the realization of the income.
C) the business activities test is met.
D) Either A, B, or C can be correct.

Question 23

U.S. citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign- earned income exclusion for 60 days in 2016; 365 days in 2017; and 60 days in 2018. The maximum earned income exclusion for 2018 rounded to the nearest whole number is?

A) $16,151
B) $17,733
C) $17,113
D) none of the above

Question 24

Jose, a U.S. citizen, has taxable income from U.S. sources of $15,000 and taxable income from a foreign country of $35,000. Assume the U.S. tax rate is 25% and Jose paid $12,000 in taxes to the foreign country. What foreign tax credit can be claimed by Jose?

Question 25

Karen, a U.S. citizen, earns $40,000 of taxable income from U.S. sources, $20,000 in taxable wages from Country A and $20,000 in taxable interest from Country B. The U.S. tax rate is 25%. The tax on Country A income is $8,000, and Country B charges no tax on the interest income. Assuming only a single basket is required, Karen's foreign tax credit that can be claimed is

A) $10,000.
B) $5,000.
C) $8,000.
D) none of the above

Question 26

Identify which of the following statements is true.

A) Aliens, who are U.S. residents, are taxed only on their U.S. income.
B) Capital gains earned in the United States, other than in the conduct of a U.S. trade or business, are taxed to a nonresident alien only if the alien is physically present in the United States for at least 183 days during the tax year.
C) A nonresident alien from a nontreaty country is taxed at a 35% rate on U.S. source investment income without the benefit of any deductions.
D) All of the above are true.

Question 27

U.S. citizen Patrick is a bona fide resident of a foreign country for all of the current year. Patrick uses a calendar year as his tax year. He has $100,000 of self- employment income and incurs $20,000 in housing expenses. The base housing cost amount is $16,624. The deduction for housing expenses is

A) $16,624 for AGI.
B) $6,816 from AGI.
C) $16,624 from AGI.
D) $3,376 for AGI.

Question 28

A U.S. citizen, who uses a calendar year as his tax year, is transferred to a foreign country by his employer. The U.S. citizen arrived in the foreign country on November 3 of last year. Residency is expected to be maintained in the foreign country until August 4 of next year. None of the years are a leap year. The first year for which an earned income exclusion can be claimed is

A) next year.
B) last year.
C) the current year.
D) The earned income exclusion cannot be claimed.

Question 29

Perry, a U.S. citizen, is transferred by his employer to Japan for a three- year assignment. Which one of the following items is not excluded under Sec. 911?

A) base salary
B) premiums paid on first $50,000 of group term life insurance
C) cost- of- living allowance
D) housing costs

Question 30

Marcella, an alien individual, is present in the United States for 122 days this year and 122 days each in the past two years. Does she satisfy both the 31- day and 183- day requirements for U.S. Residency status?

Question 31

The physical presence test method of qualifying for the foreign- earned income exclusion requires the

A) presence in one or more foreign countries for at least 330 full days during a single tax year.
B) presence in one foreign country for at least 330 full days during a 12- month period.
C) presence in one or more foreign countries for at least 330 full days during a 12- month period.
D) presence in one or more foreign countries for at least 330 consecutive full days during a 12- month period.

Question 32

Darlene, a U.S. citizen, has foreign- earned income of $150,000 and incurs $33,750 of foreign- earned income taxes. How much of Darlene's foreign income taxes are noncreditable?

Question 33

Identify which of the following statements is false.

A) Taxable pensions and annuities are excluded from the definition of earned income when computing the foreign- earned income exclusion.
B) An individual meets the bona fide resident test by establishing a home in a foreign country for 330 days.
C) Earned income is excludable from gross income only if it is foreign- source income.
D) All of the above are false.

Question 34

Identify which of the following statements is true.

A) An individual, who is a bona fide resident of a foreign country for at least one full tax year, can claim the foreign- earned income exclusion for all days on which he/she is a resident of the foreign country and physically present in that country.
B) Fringe benefits that are excluded from gross income under a Code Section other than Sec. 911 reduce the annual dollar ceiling for the foreign income exclusion.
C) An individual who is physically present in a foreign country for 330 full days out of a 12- month period can claim the foreign- earned income exclusion only for the days in the 12- month period he/she is physically present in a foreign country.
D) All of the above are false.

Question 35

Nonresident aliens are not allowed to claim the standard deduction.

Question 36

Identify which of the following statements is false.

A) A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period satisfies the bona fide foreign resident test.
B) The foreign- earned income exclusion is $104,100 in 2018.
C) The primary purpose for the foreign- earned income exclusion is to prevent double taxation of income.
D) All of the above are false.

Question 37

Identify which of the following statements is true.

A) An individual who is a resident alien of the United States is taxed on his or her worldwide income at the same tax rates that would apply to a U.S. citizen.
B) If a foreign national has a closer connection with his home country, the individual is taxed as a resident alien.
C) To obtain resident status, an alien must meet both the lawful permanent resident test and the substantial presence test.
D) All of the above are false.

Question 38

In January of the current year, Stan Signowski's U.S. employer assigned him to their Paris office. This year, he earned salary, a cost- of- living allowance, a housing allowance, a home leave allowance that permits him to return home once each year, and an education allowance to pay for U.S. schooling for his son. Stan and his wife, Jennifer, have rented an apartment in Paris and paid French income taxes. What tax issues does Stan need to consider when preparing his tax return?

Question 39

Pedro, a nonresident alien, licenses a patent to a U.S. company for an $11 per unit fee for each unit produced. As a result of receiving the fee, Pedro must recognize the fee as

A) no gain or income taxed in the United States.
B) a portion of the gain, depending on the number of days Pedro is physically present in the United States during the current year.
C) capital gain taxable in the United States.
D) ordinary income taxable in the United States.

Question 40

U.S. citizen Barry is a bona fide resident of a foreign country for all of 2018. Barry uses a calendar year as his tax year and receives $158,000 in salary and allowances from his employer. Included in the $158,000 is a $25,000 housing allowance. Barry's housing costs are $30,000. The base housing amount for the current year is $16,624. What amount related to his housing can Barry exclude on his Form 2555?

A) $13,376
B) $25,000
C) $14,545
D) $30,000

Question 41

A controlled foreign corporation (CFC) is incorporated in Country B, and is 100% owned by American Manufacturing Corporation. It purchases raw materials from its U.S. parent corporation, manufactures widgets, and sells 70% of the widgets to unrelated purchasers in Country A and 30% to unrelated purchasers in Country B. All widgets will be used in the countries in which they are purchased. The sales produce $100,000 of taxable income. The foreign- based company sales income reportable by American Manufacturing Corporation under the Subpart F rules is

A) $100,000.
B) $70,000.
C) $0.
D) $30,000.

Question 42

In 2017, 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- based company sales income to the U.S. parent company?

A) $0
B) $48,000
C) $32,000
D) $80,000

Question 43

Define the term "nonresident alien" and discuss the special tax consequences of U.S. taxation on various types of income of a nonresident alien.

Question 44

Identify which of the following statements is true.

A) One tax avoidance practice which Sec. 482 attempts to prevent is the transfer of tangible property to a foreign subsidiary at a price which is below the arm's- length price that would be used by unrelated parties.
B) Section 482 permits the IRS to restructure transactions between related parties as if the transactions were conducted at arm's length.
C) Foreign- based company sales income is earned when personal property is purchased by a Country X controlled foreign corporation (CFC) from its U.S. parent corporation and is sold to unrelated persons in Country Z.
D) All of the above are true.

Question 45

Identify which of the following statements is true.

A) A controlled foreign corporation (CFC) can avoid the constructive dividend distribution resulting from investments in U.S. property if it invests in U.S. government obligations.
B) Distributions made by a controlled foreign corporation (CFC) are deemed to be paid first from tax- deferred earnings.
C) When a controlled foreign corporation (CFC) uses Subpart F income to invest in U.S. property, the investments are characterized as constructive distributions.
D) All of the above are false.

Question 46

Prior to 2018, 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?

A) $230,000
B) $180,000
C) $150,000
D) none of the above

Question 47

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.

Question 48

Which of the following is required in order for a transaction to be considered a corporate inversion?

A) The former U.S. company and its affiliates do not conduct substantial business in the foreign country of incorporation.
B) Former shareholders of the U.S. corporation own 80% or more of the stock in the foreign corporation by reason of their U.S. stock ownership.
C) A foreign corporation acquires substantially all of the assets of a U.S. corporation.
D) All of the above are required.

Question 49

In 2017, 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 have the same gross profit. Sixty percent of the widgets were sold through a Country Y wholesaler that is 100% owned by Phoenix, and are destined for use in Country Y. The remaining 40% are sold through unrelated Country X wholesalers and are destined for use in Country X. What amount of profits will be constructively distributed as foreign- based company sales income to the U.S. parent company?

A) $0
B) $32,000
C) $80,000
D) $48,000

Question 50

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 a $15,000 capital gain on the sale of stock in a U.S. corporation while he was in the United States. The capital gain is not connected to his trade or business. How will the capital gain be taxed and how will the tax be collected?

Question 51

U.S. shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Question 52

A foreign corporation is owned by five unrelated individuals. John, Sam, and David are U.S. citizens who own 30%, 18% and 9%, respectively, of the foreign corporation's single class of stock. Alberto and Manuel are nonresident aliens who own 37% and 6%, respectively, of the foreign corporation's stock. Which of the following statements is true?

A) There are two "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
B) There are three "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
C) There are two "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).
D) There are three "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).

Question 53

Identify which of the following statements is false.

A) Nonresident aliens may use either the standard deduction or claim itemized deductions.
B) Nonresident aliens are generally allowed to claim only a single personal exemption.
C) A nonresident alien can elect to have income earned on a passive real estate investment treated as trade or business income.
D) All of the above are false.

Question 54

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

A) Foreign subsidiaries of U.S. corporations are exempt from the U.S. corporate income tax unless they earn U.S.- source investment or trade or business income.
B) Domestic corporations conducting business in a foreign country through a branch office or facility can exempt non- U.S. income from the U.S. corporate income tax.
C) Foreign subsidiaries of U.S. corporations are always exempt from the U.S. corporate income tax even if they earn U.S.- source investment or trade or business income.
D) All of the above are correct.

Question 55

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?

Question 56

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 $3,000 of interest income earned on a bank account in his home country and $1,800 of interest income earned on a bank account located in Addison, Illinois. How will the interest be taxed and how will the tax be collected?

Question 57

Which of the following is an advantage of conducting foreign operations through a branch?

A) Foreign branch income is taxed by both the United States and the host country.
B) Foreign branch income is taxed at a lower rate than domestic income.
C) Foreign branch losses can offset domestic income.
D) The parent's assets are protected from foreign branch creditors.

Question 58

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?

Question 59

Identify which of the following statements is true.

A) Under the Subpart F rules, controlled foreign corporations (CFCs) are required to distribute a certain portion of their income as dividends to their U.S. shareholders.
B) When a controlled foreign corporation (CFC) earns Subpart F income, such income is considered to be a constructive distribution to the CFC's U.S. shareholders on the last day of the CFC's tax year, or the last day on which CFC status is retained.
C) For a foreign corporation to be a controlled foreign corporation (CFC), more than 40% of its voting stock, or more than 40% of the value of its outstanding stock, must be owned by U.S. shareholders on any day of the corporation's tax year.
D) All of the above are true.

Question 60

Under the Subpart F rules, controlled foreign corporations (CFCs) are required to distribute a certain portion of their income as dividends to their U.S. shareholders.

Question 61

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?

Question 62

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)?

Question 63

Bell Corporation, a domestic corporation, sells jars to its wholly owned foreign subsidiary, Jam. Jam Corporation is incorporated in and pays taxes to Country J. Bell Corporation normally sells jars to a U.S. wholesaler providing services similar to those provided by Jam at a price of $4 per unit. Both wholesalers incur similar costs. If Bell Corporation sells jars to Jam for $3 per unit, what are the tax effects?

Question 64

Discuss the advantages of conducting overseas business activities through a foreign corporation.

Question 65

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.

Question 66

Guinness Corporation, a U.S. corporation, began operating overseas in the current year. This year, Guinness sold machine tools that it manufactured in the United States to Canadian companies from a branch office located in Toronto, purchased a 40% investment in a Brazilian corporation from which it received a dividend, and received royalties from an English firm that is the licensee of machine tool patents held by Guinness. The English firm uses the patents to manufacturer machine tools it sells in England. What international tax issues should Guinness's Director of Taxes consider with respect to these activities?

Question 67

Discuss the Sec. 482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower- than- normal price.

Question 68

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

Question 69

Discuss the use of a "tax haven" nation to reduce taxes and the effect of Subpart F rules on such planning.

Question 70

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

Question 71

Zeta Corporation, incorporated in Country Z, is 100% owned by Zelda Corporation, a U.S. corporation. Zelda purchases some machines from an unrelated corporation, for use in Country A. The portion of the sales contract covering installation and maintenance of the machines is assigned by Zelda to Zeta. Zeta is to be paid for these services by Zelda. Does this qualify as foreign base company services income?

Question 72

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

Question 73

A foreign corporation is a CFC that is in its initial year of operation. For the current year, it reports $1 million of earnings and has an aggregate U.S. Property investment of $400,000. If none of the earnings qualified as Subpart F income, explain how the earnings are taxed.

Question 74

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?

Question 75

What are the consequences of classification as a corporate inversion?

A) The foreign corporation will be treated as if it is a U.S. corporation.
B) The corporation will be subject to a flat 35% tax rate.
C) Foreign tax credits will be disallowed on all future earnings.
D) If more than half of the shareholders of the new company are the same as the former company, the corporation is considered a U.S. corporation.

Question 76

Which of the following statements is incorrect?

A) U.S. taxpayers with a foreign branch can reduce part or all of their U.S. taxes by the foreign tax credit.
B) A foreign corporation's (less than 50% ownership) are not taxed until repatriated.
C) A domestic subsidiary's earnings are taxed in the year earned.
D) All of a controlled foreign corporation's earnings are taxed as earned.

Question 77

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. The shareholders are not related. Is the foreign corporation a controlled foreign corporation (CFC)?

Question 78

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)?

Question 79

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)?

Question 80

Quality Corporation created a foreign subsidiary in Country C this year. The subsidiary receives components from Quality, assembles the components into a finished product using local labor, and sells them to unrelated wholesalers in Countries A, B, and C using its own sales force. The foreign subsidiary has paid no dividends to the parent this year. What tax issues should Quality's Director of Taxes consider with respect to these activities?