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Chapter 24 The U.S. Taxation of Multinational Transactions

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Question;Chapter 24;The U.S. Taxation of Multinational Transactions;True / False Questions;1. "Outbound;taxation" deals with the U.S. tax rules that apply to U.S. persons doing;business outside the United States.;True False;2. Amy is a;U.S. citizen. During the year she earned income from an investment in a French;company. Amy will be subject to U.S. taxation on her income under the principle;of source-based taxation.;True False;3. Nexus;involves the criteria used by a government to assert its right to tax a person;or transaction within or without its borders.;True False;4. The;United States generally taxes U.S. source fixed and determinable, annual or;periodic income earned by non-U.S. persons by applying a withholding tax to the;gross amount of income.;True False;5. Philippe;is a French citizen. During 2014 he spent 150 days in the United States on;business. Because Philippe does not spend 183 days in the United States in;2014, he will not be treated as a resident alien for U.S. tax purposes.;True False;6. A non;U.S. citizen with a green card will always be treated as a resident alien for;U.S. tax purposes regardless of the number of days she spends in the United;States during the current year.;True False;7. The;foreign tax credit regime is the primary mechanism used by the United States;government to mitigate or eliminate the potential double taxation of income;earned by U.S. persons outside the United States.;True False;8. Marcel, a;U.S. citizen, receives interest income from bonds issued by a Dutch;corporation. The interest income will be considered U.S. source income for U.S.;tax purposes.;True False;9. Cecilia;a Brazilian citizen and resident, spent 120 days working in the United States;in the current year and earned $50,000. Because she spent more than 90 days in;the United States, Cecilia's income will be treated as U.S. source and subject;to U.S. taxation. The United States does not have an income tax treaty with;Brazil.;True False;10. The gross;profit from a sale of inventory manufactured in the United States and sold in;Spain will always be treated as 100 percent U.S. source income.;True False;11. Deductible;interest expense incurred by a U.S. corporation will always be treated as a;U.S. source deduction.;True False;12. Once a;U.S. corporation chooses a method to allocate interest expense, either fair;market value or tax book value, that election cannot be changed without the;permission of the commissioner of the Internal Revenue Service.;True False;13. Under most;U.S. treaties, a resident of the other country must have a permanent;establishment in the United States before being subject to U.S. taxation on;business profits earned within the United States.;True False;14. Alex, a;U.S. citizen, became a resident of Belgium in 2013. Alex will no longer be;subject to U.S. taxation on income he earns in Belgium if such income is exempted;from tax under the U.S. - Belgium treaty.;True False;15. Alhambra;Corporation, a U.S. corporation, receives a dividend from its 100 percent owned;Spanish subsidiary. For foreign tax credit purposes, the dividend will always;be characterized as passive category income.;True False;16. All taxes;paid to a foreign government by a U.S. corporation are creditable on the;corporation's U.S. tax return.;True False;17. The;Canadian government imposes a withholding tax of 15 percent on a dividend paid;by a Canadian corporation to a U.S. individual. The withholding tax will be;creditable on the individual's U.S. tax return as an "in lieu of;tax.;True False;18. U.S.;individuals and corporations are eligible for a deemed-paid credit on dividends;received from foreign corporations.;True False;19. A hybrid;entity established in Ireland is treated as a flow-through entity for U.S. tax;purposes and a corporation for Irish tax purposes.;True False;20. 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.;True False;21. All income;earned by a Swiss corporation owned by a U.S. corporation is deferred from U.S.;taxation until such income is remitted back to the United States.;True False;22. A Japanese;corporation owned by eleven U.S. individuals cannot be treated as a controlled;foreign corporation for U.S. tax purposes.;True False;23. 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.;True False;24. All;passive income earned by a CFC will be treated as foreign personal holding;company income under subpart F for U.S. tax purposes.;True False;25. A U.S.;corporation can use hybrid entities to avoid the application of subpart F to;cross border payments made between wholly-owned entities outside the United;States.;True False;Multiple Choice Questions;26. Which;statement best describes the U.S. framework for taxing multinational;transactions?;A. The U.S.;government applies source-based taxation to income earned by U.S. and non-U.S.;persons.;B. The U.S.;government applies residence-based taxation to income earned by U.S. and non-U.S.;persons.;C. The U.S.;government applies residence-based taxation to income earned by U.S. persons;and source-based taxation to income earned by non-U.S. persons.;D. The U.S.;government applies source-based taxation to income earned by U.S. persons and;residence-based taxation to income earned by non-U.S. persons.;27. Which;statement best describes the U.S. framework for taxing non-U.S. persons on;income earned from U.S. sources?;A. Income;that is characterized as effectively connected income is subject to net;taxation while income that is characterized as fixed and determinable, annual;or periodic income is subject to a withholding tax applied to gross income.;B. Income;that is characterized as effectively connected income is subject to a withholding;tax applied to gross income while income that is characterized as fixed and;determinable, annual or periodic income is subject to net taxation.;C. All U.S.;source income is subject to net taxation, regardless of whether it is;characterized as effectively connected or as fixed and determinable, annual or;periodic income.;D. All U.S.;source income is subject to a withholding tax applied to gross income;regardless of whether it is characterized as effectively connected or as fixed;and determinable, annual or periodic income.;28. Which;statement best describes the U.S. framework for determining if an individual;who is not a U.S. citizen will be treated as a resident alien for U.S. tax;purposes?;A. A person;must have a green card and meet a substantial presence test to be treated as a;resident alien for U.S. tax purposes.;B. A person;must have a green card to be treated as a resident alien for U.S. tax purposes.;C. A person;must meet a substantial presence test to be treated as a resident alien for;U.S. tax purposes.;D. A person;with a green card will always be treated as a resident alien for U.S. tax;purposes, while a person without a green card may be treated as a resident;alien if she meets a substantial presence test.;29. Which of;the following statements best describes the substantial presence test as it;applies to determining if a non U.S. citizen is a resident alien for U.S. tax;purposes?;A. To be;treated as a resident alien, an individual must be physically present in the;United States for 183 days in the current year.;B. To be;treated as a resident alien, an individual must be physically present in the;United States for 183 days in the current year and each of the prior two years.;C. To be;treated as a resident alien, an individual must be physically present in the;United States for 183 days using a formula that includes the current year and;the prior two years.;D. To be;treated as a resident alien, an individual must be physically present in the;United States for 183 days using a formula that includes the current year and;the prior year.;30. 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;31. Guido was;physically present in the United States for 150 days in 2014, 120 days in 2013;and 90 days in 2012. Under the substantial presence test formula, how many days;is Guido deemed physically present in the United States in 2014?;A. 360;B. 205;C. 190;D. 150;32. Gwendolyn;was physically present in the United States for 90 days in 2014, 180 days in;2013, and 30 days in 2012. Under the substantial presence test formula, how;many days is Gwendolyn deemed physically present in the United States in 2014?;A. 300;B. 155;C. 150;D. 90;33. Under;which of the following scenarios could Charles, a citizen of England, be;eligible to claim the "closer connection" exception to the;substantial presence test in 2014?;A. Charles;spent 183 days in the United States in 2014 and has his tax home in England.;B. Charles;spent 183 days in the United States in 2014 and has his tax home in the United;States.;C. Charles;spent 182 days in the United States in 2014 and has his tax home in England.;D. Charles;spent 182 days in the United States in 2014 and has his tax home in the United;States.;34. Flint;Steel Corporation has a precredit U.S. tax of $170,000 on $500,000 of taxable;income in 2014. Flint has $200,000 of foreign source taxable income and paid;$80,000 of income taxes to the German government on this income. All of the;foreign source income is treated as general category income for foreign tax;credit purposes. Flint's foreign tax credit on its 2014 tax return will be;A. $102,000;B. $80,000;C. $68,000;D. $32,000;35. Ames;Corporation has a precredit U.S. tax of $340,000 on $1,000,000 of taxable;income in 2014. Ames has $600,000 of foreign source taxable income and paid;$120,000 of income taxes to the Australian government on this income. All of;the foreign source income is treated as general category income for foreign tax;credit purposes. Ames's foreign tax credit on its 2014 tax return will be;A. $72,000;B. $120,000;C. $204,000;D. $340,000;36. Austin;Corporation, a U.S. corporation, received the following investment income;during 2014: $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 2014?;A. $140,000;B. $110,000;C. $70,000;D. $60,000;37. Russell;Starling, an Australian citizen and resident, received the following investment;income during 2014: $5,000 of dividend income from ownership of stock in a U.S.;corporation, $10,000 interest from a certificate of deposit in a U.S. bank;$3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen;and $2,000 capital gain from sale of a stock in a U.S. corporation. How much of;Russell's income will be subject to U.S. taxation in 2014?;A. $20,000;B. $15,000;C. $10,000;D. $8,000;38. Giselle is;a citizen and resident of Brazil, a country with which the United States does;not have an income tax treaty. Giselle earned $24,000 of compensation within;the United States. She worked 60 days in the United States and 180 days in;Brazil. How much of her compensation earned in the United States will be;subject to U.S. tax?;A. $24,000;B. $8,000;C. $6,000;D. $0;39. 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. 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?;A. $200,000;B. $100,000;C. $0;D. The;answer cannot be determined with the information provided.;40. Orono;Corporation manufactured inventory in the United States and sold the inventory;to customers in Canada. Gross profit from the sale of the inventory was;$300,000. Title to the inventory passed FOB: destination. 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?;A. $300,000;B. $150,000;C. $0;D. The;answer cannot be determined with the information provided.;41. Which of;the following expenses incurred by a U.S. corporation is not subject to special;apportionment rules for foreign tax credit purposes?;A. Interest;B. Research;and experimental;C. Advertising;D. State and;local income taxes;42. Manchester;Corporation, a U.S. corporation, incurred $100,000 of interest expense during;2014. Manchester manufactures inventory that is sold within the United States;and abroad. The total tax book value and fair market value of its U.S.;production assets is $20,000,000 and $50,000,000, respectively. The total tax;book value and fair market value of its foreign production assets is $5,000,000;and $10,000,000, respectively. What is the minimum amount of interest expense;that can be apportioned to the company's foreign source income for foreign tax;credit purposes, assuming this is the first year the company makes this;computation?;A. $0;B. $20,000;C. $25,000;D. $100,000;43. Hanover;Corporation, a U.S. corporation, incurred $300,000 of interest expense during;2014. Hanover manufactures inventory that is sold within the United States and;abroad. The total tax book value and fair market value of its production assets;is $20,000,000 and $60,000,000, respectively. The total tax book value and fair;market value of its foreign production assets is $5,000,000 and $20,000,000;respectively. What is the minimum amount of interest expense that can be;apportioned to the company's foreign source income for foreign tax credit;purposes, assuming this is the first year the company makes this computation?;A. $300,000;B. $100,000;C. $75,000;D. $60,000;44. Knoxville;Corporation, a U.S. corporation, incurred $300,000 of research and experimental;(R&E) expenses during 2014. Knoxville sells inventory within the United;States and abroad. Knoxville conducted all of the research related to the;inventory within the United States. Gross sales of the inventory were;$10,000,000, of which $3,000,000 was from foreign source sales. Gross profit;from sale of the inventory was $5,000,000, of which $2,000,000 was from foreign;source sales. What is the minimum amount of R&E expense that can be;apportioned to the company's foreign source income for foreign tax credit;purposes, assuming this is the first year the company makes this computation?;A. $120,000;B. $90,000;C. $45,000;D. $0;45. Camellia;Corporation, a U.S. corporation, incurred $600,000 of research and experimental;(R&E) expenses during 2014. Camellia sells inventory within the United;States and abroad. Camellia conducted all of the research related to the;inventory within the United States. Gross sales of the inventory were;$20,000,000, of which $12,000,000 was from foreign source sales. Gross profit;from sale of the inventory was $8,000,000, of which $2,000,000 was from foreign;source sales. What is the minimum amount of R&E expense that can be;apportioned to the company's foreign source income for foreign tax credit;purposes, assuming this is the first year the company makes this computation?;A. $360,000;B. $180,000;C. $150,000;D. $112,500;46. Which of;the following is not a benefit derived from an income tax treaty between the;United States and another country?;A. Lower;withholding tax rates imposed on cross border dividend and interest payments;B. A higher;threshold for determining when a person has nexus in the other country;C. Lower;statutory tax rates imposed on effectively connected income earned by a;resident of one country in the other country;D. A higher;threshold before an individual is considered a resident of the other country;for tax purposes;47. Absent a;treaty provision, what is the statutory withholding tax rate imposed by the;United States on a dividend paid by a U.S. corporation to a resident of;Denmark?;A. 30%;B. 15%;C. 5%;D. 0%;48. Under a;U.S. treaty, what must a non-resident corporation create in the United States;before it is subject to U.S. taxation on its business profits?;A. U.S.;trade or business;B. Permanent;establishment;C. The;physical presence of at least one employee;D. The;physical presence of an asset such as a warehouse;49. A U.S.;corporation reports its foreign tax credit computation on which tax form?;A. Form 1116;B. Form 1118;C. Form 1120;D. Form 8832;50. Which of;the following items of foreign source income is classified as passive category;income for foreign tax credit purposes?;A. Dividend;received from a 5 percent owned foreign corporation, all of the income of which;is derived from an active business;B. Dividend;received from a 20 percent owned foreign corporation, all of the income of;which is derived from an active business;C. Dividend;received from a 100 percent owned foreign corporation, all of the income of;which is derived from an active business;D. None of;the dividends is classified as passive category income;51. Which of;the following tax rules applies to an excess foreign tax credit (FTC) that;arises in 2014?;A. The;excess FTC is first carried back to 2013 and any excess is carried forward for;10 years.;B. The;excess FTC is first carried back to 2012, then 2013, and any excess is carried;forward for 20 years.;C. The;excess FTC is first carried back to 2011, then 2012, then 2013, and any excess;is carried forward for 5 years.;D. The;excess FTC is carried forward 10 years, with no carryback allowed.;52. Which of;the following foreign taxes is not a creditable foreign tax for U.S. tax;purposes?;A. Income;tax paid to the government of Portugal;B. Income;tax paid to the city of Amsterdam;C. Value-added;tax paid to the government of France;D. All of;these taxes are creditable;53. Which of;the following foreign taxes are not creditable for U.S. tax purposes?;A. Direct;taxes paid by a U.S. corporation on income earned in a foreign branch;B. Deemed;paid taxes on a dividend received by a U.S. corporation from its 100 percent;owned foreign subsidiary;C. Withholding;taxes imposed on a dividend received by a U.S. corporation from its 100 percent;owned foreign subsidiary;D. All of;these taxes are creditable;54. A deemed;paid credit is available on which of the following dividends received by a U.S.;corporation?;A. Dividend;received from a 5 percent owned foreign corporation, all of the income of which;is derived from an active business.;B. Dividend;received from a 20 percent owned foreign corporation, all of the income of;which is derived from an active business.;C. Dividend;received from a 100 percent owned foreign corporation, all of the income of;which is derived from an active business.;D. Both;dividend received from a 20 percent owned foreign corporation, all of the;income of which is derived from an active business and dividend received from a;100 percent owned foreign corporation, all of the income of which is derived;from an active business are correct answers.;55. Bismarck;Corporation has a precredit U.S. tax of $340,000 on $1,000,000 of taxable income;in 2014. Bismarck has $200,000 of foreign source taxable income characterized;as general category income and $50,000 of foreign source taxable income;characterized as passive category income. Bismarck paid $80,000 of foreign;income taxes on the general category income and $10,000 of foreign income taxes;on the passive category income. What amount of foreign tax credit (FTC) can;Bismarck use on its 2014 U.S. tax return and what is the amount of the;carryforward, if any?;A. $90,000;FTC with $0 carryforward;B. $85,000;FTC with $5,000 carryforward;C. $78,000;FTC with $12,000 carryforward;D. $78,000;FTC with $5,000 carryforward;56. Pierre;Corporation has a precredit U.S. tax of $510,000 on $1,500,000 of taxable;income in 2014. Pierre has $300,000 of foreign source taxable income;characterized as general category income and $150,000 of foreign source taxable;income characterized as passive category income. Pierre paid $90,000 of foreign;income taxes on the general category income and $15,000 of foreign income taxes;on the passive category income. What amount of foreign tax credit (FTC) can;Pierre use on its 2014 U.S. tax return and what is the amount of the;carryforward, if any?;A. $153,000;FTC with $0 carryforward;B. $105,000;FTC with $0 carryforward;C. $105,000;FTC with $48,000 carryforward;D. $117,000;FTC with $0 carryforward;57. Provo;Corporation received a dividend of $350,000 from its 100 percent owned German;subsidiary. A deemed paid credit of $150,000 was available on the dividend. No;withholding tax was imposed on the dividend. What are the U.S. tax consequences;to Provo on receipt of the dividend, assuming the foreign tax credit limitation;is not binding and the company breaks even on its U.S. operations? Assume a;U.S. tax rate of 34 percent.;A. Taxable;income of $350,000 and a net U.S. tax liability of $0;B. Taxable;income of $350,000 and a net U.S. tax liability of $20,000;C. Taxable;income of $500,000 and a net U.S. tax liability of $170,000;D. Taxable;income of $500,000 and a net U.S. tax liability of $20,000;58. 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.;A. Taxable;income of $7,000,000 and a deemed paid credit of $3,000,000;B. Taxable;income of $10,000,000 and a deemed paid credit of 3,000,000;C. Taxable;income of $7,000,000 and a deemed paid credit of $1,500,000;D. Taxable;income of $10,000,000 and a deemed paid credit of $1,500,000;59. Madrid;Corporation is a 100 percent owned Spanish subsidiary of Doubloon Corporation;a U.S. corporation. Madrid had post-1986 earnings and profits of ?4,200,000 and;post-1986 foreign taxes of $2,700,000. During the current year, Madrid paid a;dividend of ?2,100,000 to Doubloon. Assume an exchange rate of ?1 = $1.50.;Compute the tax consequences to Doubloon as a result of this dividend.;A. Taxable;income of $3,150,000 and a deemed paid credit of $2,700,000;B. Taxable;income of $4,500,000 and a deemed paid credit of $2,700,000;C. Taxable;income of $3,150,000 and a deemed paid credit of $1,350,000;D. Taxable;income of $4,500,000 and a deemed paid credit of $1,350,000;60. 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. taxable;income of $2,000,000. Cruller's U.S. tax rate is 34 percent. Compute the tax;consequences to Cruller as a result of this dividend.;A. Taxable;income of $3,000,000, a net U.S. tax of $590,000, and a FTC carryover of $0;B. Taxable;income of $3,000,000, a net U.S. tax of $680,000, and a FTC carryover of;$90,000;C. Taxable;income of $2,600,000, a net U.S. tax of $680,000, and a FTC carryover of;$226,000;D. Taxable;income of $2,600,000, a net U.S. tax of $454,000, and a FTC carryover of $0;61. Which of;the following statements best describes how the deemed paid credit is computed;by a U.S. corporation.;A. The;foreign subsidiary's post-1986 earnings and profits are kept in functional;currency and the post-1986 foreign taxes are kept in U.S. dollars.;B. The;foreign subsidiary's post-1986 earnings and profits are kept in U.S. dollars;and the post-1986 foreign taxes are kept in functional currency.;C. The;foreign subsidiary's post-1986 earnings and profits and post-1986 foreign taxes;are kept in functional currency.;D. The;foreign subsidiary's post-1986 earnings and profits and post-1986 foreign taxes;are kept in U.S. dollars.;62. Boca;Corporation, a U.S. corporation, reported U.S. taxable income of $1,000,000 in;2014. Included in the computation of taxable income was foreign source taxable;income of $200,000, of which $87,500 was a dividend received from the;corporation's 100 percent owned subsidiary in Ireland. The dividend brought;with it a deemed paid credit of $12,500. In addition, a withholding tax of;$4,375 was imposed on the dividend. Compute Boca Corporation's net U.S. tax;liability for 2014. Assume a U.S. tax rate of 34 percent.;A. $335,625;B. $327,500;C. $327,375;D. $323,125;63. Which of;the following tax benefits does not arise when a U.S. corporation forms a;corporation in Ireland through which to earn business profits in Ireland?;A. Potential;deferral of U.S. tax on income earned by the corporation.;B. Treaty;benefits on cross border payments between the Irish corporation and the U.S.;corporation.;C. Use of;transfer pricing to shift income between the United States and Ireland.;D. Flow-through;of losses from the Irish corporation to the tax return of the U.S. corporation.;64. Which of;the following tax or non-tax benefits does not arise when a U.S. corporation;forms a hybrid entity in Germany through which to earn business profits in;Germany and elects to have the entity treated as a branch for U.S. tax;purposes?;A. Potential;deferral of U.S. tax on income earned by the corporation;B. Flow-through;of losses from the German corporation to the tax return of the U.S. corporation;C. Limited;liability to the U.S. corporation for acts committed by the hybrid entity;D. Free;transferability of the stock of the hybrid entity by the U.S. corporation;65. What form;is used by a U.S. corporation to "check-the-box" to elect the U.S.;tax consequences of forming a hybrid entity outside the United States?;A. Form 1118;B. Form 1120;C. Form 8832;D. Form 8833;66. A;rectangle with a triangle within it is a symbol used to represent what;organizational form?;A. Partnership;B. Corporation;C. Hybrid;entity treated as a branch for U.S. tax purposes;D. Hybrid;entity treated as a partnership for U.S. tax purposes;67. A;rectangle with an inverted triangle within it is a symbol used to represent;what organizational form?;A. Partnership;B. Corporation;C. Hybrid;entity treated as a corporation for U.S. tax purposes;D. Hybrid;entity treated as a partnership for U.S. tax purposes;68. Which of;the following statements best describes the operation of subpart F as it;applies to income earned by a foreign corporation?;A. Subpart F;causes all income of a controlled foreign corporation to be treated as a deemed;dividend to all U.S. persons owning stock in the corporation on the last day of;the corporation's tax year.;B. Subpart F;causes certain income of a controlled foreign corporation to be treated as a;deemed dividend to all U.S. persons owning stock in the corporation on the last;day of the corporation's tax year.;C. Subpart F;causes certain income of a controlled foreign corporation to be treated as a;deemed dividend to only those U.S. shareholders owning stock in the corporation;on the last day of the corporation's tax year.;D. Subpart F;causes all income of a controlled foreign corporation to be treated as a deemed;dividend to only those U.S. shareholders owning stock in the corporation on the;last day of the corporation's tax year.;69. Which of;the following persons should not be treated as a "U.S. shareholder;of a controlled foreign corporation (CFC) for subpart F purposes?;A. A U.S.;citizen owning 5 percent of the CFC;B. A U.S.;citizen owning 15 percent of the CFC;C. A U.S.;corporation owning 15 percent of the CFC;D. All of;these persons are U.S. shareholders for subpart F purposes;70. Windmill;Corporation, a Dutch corporation, is owned by the following unrelated persons;50 percent by a U.S. corporation, 5 percent by a U.S. individual, and 45;percent by a Swiss corporation. During the year, Windmill earned $2,000,000 of;subpart F income. Which of the following statements is true about the;application of subpart F to the income earned by Windmill?;A. Windmill;is a CFC and the U.S. corporation and U.S. individual will have a deemed;dividend of $1,000,000 and $100,000, respectively.;B. Windmill;is a CFC and only the U.S. corporation will have a deemed dividend of;$1,000,000.;C. Windmill;is a CFC and the U.S. corporation, U.S. individual, and Swiss corporation will;have a deemed dividend of $1,500,000, $100,000, and $900,000, respectively.;D. Windmill;is not a CFC and none of the shareholders will have a deemed dividend under;subpart F.;71. Boomerang;Corporation, a New Zealand corporation, is owned by the following unrelated;persons: 40 percent by a U.S. corporation, 15 percent by a U.S. individual, and;45 percent by an Australian corporation. During the year, Boomerang earned;$3,000,000 of subpart F income. Which of the following statements is true about;the application of subpart F to the income earned by Boomerang?;A. Boomerang;is a CFC and the U.S. corporation and U.S. individual will have a deemed;dividend of $1,200,000 and $450,000, respectively.;B. Boomerang;is a CFC and only the U.S. corporation will have a deemed dividend of;$1,200,000.;C. Boomerang;is a CFC and the U.S. corporation, U.S. individual, and Australian corporation;will have a deemed dividend of $1,200,000, $450,000, and $1,350,000;respectively.;D. Boomerang;is not a CFC and none of the shareholders will have a deemed dividend under;subpart F.;72. Which of;the following income earned by a controlled foreign corporation incorporated in;Spain is not foreign personal holding company income?;A. Interest;income received from a loan to an unrelated party;B. Dividend;income from a five percent investment in an unrelated corporation;C. Rent;received from a passive investment in an apartment complex;D. Gross;profit from the manufacture and sale of inventory to an unrelated party;73. Which of;the following transactions engaged in by a Swiss controlled foreign corporation;creates foreign base company sales income?;A. Purchase;of inventory from an unrelated person in Germany and sale to a related person;in Poland.;B. Purchase;of inventory from a related person in Germany and sale to an unrelated person;in Switzerland.;C. Purchase;of inventory from a related person in Germany and sale to a related person in;Poland.;D. Purchase;of inventory from an unrelated person in Germany and sale to an unrelated;person in Poland.;74. Which of;the following exceptions could cause subpart F income to be excluded from the;deemed dividend regime?;A. The full;inclusion rule;B. The de;minimis rule;C. The high;tax rule;D. Both the;de minimis rule and the high tax rule could cause subpart F income to be;excluded from the deemed dividend regime.;75. Before;subpart F applies, a foreign corporation must be a CFC for how many consecutive;days?;A. 1;B. 30;C. 183;D. 365;Essay Questions;76. 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 2012, Nicole came to;the United States on business and stayed for 180 days. She came to the United;States again on business in 2013 and stayed for 150 days. In 2014 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 2014 under the substantial;presence test?;77. Natsumi is;a citizen and resident of Japan. She has a full-time job in Japan and has lived;there with her family for the past 20 years. In 2012, Natsumi came to the;United States on business and stayed for 240 days. She came to the United;States again on business in 2013 and stayed for 120 days. In 2014 she came back;to the United States on business and stayed for 120 days. Does Natsumi meet the;U.S. statutory definition of a resident alien in 2014 under the substantial;presence test?;78. Reno;Corporation, a U.S. corporation, reported total taxable income of $6,000,000 in;2014. 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 $720,000 on its branch;income. Compute Reno's net U.S. tax liability and any foreign tax credit;carryover for 2013. Use a U

 

Paper#38073 | Written in 18-Jul-2015

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