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Exam 9: Taxation of International Transactions

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Question 21

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Given the following information,determine whether Greta,an alien,is a U.S.resident for 2008.Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

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For Federal income tax purposes,Greta is...

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Question 22

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All of an NRA's U.S.-source income that is not effectively connected with a U.S.trade or business is subject to a flat U.S.income tax rate of 30% unless modified by a treaty.

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B) False

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Question 23

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During the current year,USACo (a domestic corporation) sold equipment to FrenchCo,a foreign corporation,for $350,000,with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $90,000 of depreciation deductions on the equipment,all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $10,000 on the date of sale.What is the source of the $340,000 gain on the sale of this equipment?

A nonresident alien is defined as someone who is not a citizen or resident of the U.S.

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Type of U.S.-source income potentially taxed to foreign persons not engaged in a U.S.trade or business.

Which of the following transactions,if entered into by an NRA,would not be subject to U.S.taxation?

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Activity that creates the potential for effectively connected income.

"Inbound" and "offshore" transfers are exempt from taxation under § 367.

Scott,Inc.,a domestic corporation,receives a dividend of $800,000 from a § 902 noncontrolled foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott,Inc.elects the FTC,its gross income attributable to this dividend is $800,000.

Young,Inc.,a U.S.corporation,earns foreign-source income classified in two different limitation baskets in the current year.It earns $100,000 in passive foreign-source income and suffers a net loss of $80,000 in the general limitation basket.What is the numerator of the FTC limitation formula for the passive basket in the current year?

Which of the following statements best describes the purpose of § 482?

Amelia,Inc.,a domestic corporation,has worldwide taxable income of $8 million,including a $600,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's post-1986 undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings.What is Amelia's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Section 1248 applies to which of the following transactions?

The United States has income tax treaties with only members of the European Union.

If Polka,Inc.,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source single-category (basket)income of $90,000 and has worldwide taxable income of $450,000,on which it owes U.S.taxes of $157,500 before FTC,its FTC is $50,000.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -A country with very low or no income tax.

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Old,Inc.,a U.S.corporation,earns foreign-source income classified in two different limitation baskets in the current year.It earns $20,000 in passive foreign-source income and suffers a net loss of $35,000 in the general limitation basket.What is the numerator of the FTC limitation formula for the passive basket in the current year?

U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

BlueCo,a domestic corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.BlueCo transfers $200 in inventory (basis = $20) and $900 in land (basis = $950) to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain,if any,is recognized as a result of this transaction?