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Exam 13: The Ustaxation of Multinational Transactions

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Question 51

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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?

A) 31.
B) 61.
C) 181.
D) 183.

E) A) and B)
F) A) and C)

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Question 52

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Gwendolyn was physically present in the United States for 90 days in 2017,180 days in 2016,and 30 days in 2015.Under the substantial presence test formula,how many days is Gwendolyn deemed physically present in the United States in 2017?

A) 300.
B) 155.
C) 150.
D) 90.

E) All of the above
F) C) and D)

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Question 53

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Which of the following persons should not be treated as a "U.S.shareholder" of a controlled foreign corporation (CFC) for subpart F purposes?

One of the tax advantages to using a corporation through which to earn income in Germany is deferral of U.S.taxation on active business income earned by the corporation until such income is remitted back to the United States.

Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico.Gross profit from the sale of the inventory was $200,000.Title to the inventory passed FOB: shipping point.Under the 50/50 method,how much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

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.sourced taxable income of $2,000,000 before considering the dividend received from Horton Corporation.Cruller's U.S.tax rate is 34 percent.Compute the tax consequences to Cruller as a result of this dividend.

Jimmy Johnson,a U.S.citizen,is employed by General Motors Corporation,a U.S.corporation.In June 2017,General Motors relocated Jimmy to its operations in Germany for the remainder of 2017.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 2017 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 2017?

All taxes paid to a foreign government by a U.S.corporation are creditable on the corporation's U.S.tax return.

Appleton Corporation,a U.S.corporation,reported total taxable income of $10,000,000 in 2017.Taxable income included $2,500,000 of foreign source taxable income from the company's branch operations in the United Kingdom.All of the branch income is general category income.Appleton paid U.K.income taxes of $750,000 on its branch income.Compute Appleton's net U.S.tax liability and any foreign tax credit carryover for 2017.Assume a U.S.corporate tax rate of 34%.

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 2017: $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 2017?

The United States generally taxes U.S.sourced fixed and determinable,annual or periodic income (FDAP)earned by non-U.S.persons by applying a withholding tax to the gross amount of income.

U.S.individuals and corporations are eligible for a deemed-paid credit on dividends received from foreign corporations.

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.

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 2015,Nicole came to the United States on business and stayed for 180 days.She came to the United States again on business in 2016 and stayed for 150 days.In 2017 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 2017 under the substantial presence test?

Gouda,S.A.,a Belgium corporation,received the following sources of income during 2017: $10,000 interest income from a loan to its 100 percent owned Dutch subsidiary. $20,000 dividend income from its 100 percent owned U.S.subsidiary. $30,000 royalty income from its Irish subsidiary for use of a trademark outside the United States. $40,000 rent income from its Canadian subsidiary for use of a warehouse located in Wisconsin. $5,000 capital gain from sale of stock in its 40 percent owned New Zealand joint venture.Title passed in New Zealand. What amount of U.S.source income does Gouda have in 2017?

Which statement best describes the U.S.framework for taxing non-U.S.persons on income earned from U.S.sources?

Reno Corporation,a U.S.corporation,reported total taxable income of $6,000,000 in 2017.Taxable income included $1,800,000 of foreign source taxable income from the company's branch operations in Canada.All of the branch income is general category income.Reno paid Canadian income taxes of C$720,000 on its branch income.Compute Reno's net U.S.tax liability and any foreign tax credit carryover for 2017.Use a U.S.corporate tax rate of 34%.Assume an exchange rate of C$1 = $1.

Spartan Corporation,a U.S.company,manufactures widgets for sale in the United States and Europe.All manufacturing activities take place in the United States.During the current year,Spartan sold 100,000 widgets to European customers at a price of $5 each.Each widget costs $2 to produce.All of Spartan's production assets are located in the United States.For each independent scenario,determine the source of the gross profit from sale of the widgets using the 50/50 method. A.Spartan ships its widgets F.O.B.,place of destination. B.Spartan ships its widgets F.O.B.,place of shipment.

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.