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Question;1017. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question MA #1- Match the definition with the correct;term.Bilateral agreement between two countries related to tax issues.U.S.;taxpayers earning income outside the United States.Foreign taxpayers earning;income inside the United States.Method for sourcing income and;deductions.Treasury powers over transfer pricing.A country with very low or no;income tax.A unit that accounts for profits and losses using its functional;currency.Income tax treaty Outbound Inbound Allocation and apportionment;Section 482 Tax haven Qualified business unit;[a] 1. Bilateral agreement between;two countries related to tax issues.;[b] 2. U.S. taxpayers earning;income outside the United States.;[c] 3. Foreign taxpayers;earning income inside the United States.;[d] 4. Method for sourcing;income and deductions.;[e] 5. Treasury powers over;transfer pricing.;[f] 6. A country with very low;or no income tax.;[g] 7. A unit that accounts;for profits and losses using its functional currency.;1018. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question MA #8- Match the definition with the correct;term.Owner of shares counted in determining whether a foreign corporation;is a controlled foreign corporation.Income that tends to lack any true economic;connection to the country of a CFC?s organization.Passive type income treated;as Subpart F income.A non-U.S. subsidiary whose income may be taxed to the U.S.;parent before repatriation.Earnings already taxed to a U.S. shareholder of a;controlled foreign corporation.Ownership threshold for U.S. shareholders to be;deemed a controlled foreign corporation.U.S. shareholder Foreign base company;income Foreign personal holding company income Controlled foreign corporation;Previously taxed income More than 50 percent More than 80 percent;[a] 1. Owner of shares counted in;determining whether a foreign corporation is a controlled foreign corporation.;[b] 2. Income that tends to;lack any true economic connection to the country of a CFC?s organization.;[c] 3. Passive type income;treated as Subpart F income.;[d] 4. A non-U.S. subsidiary;whose income may be taxed to the U.S. parent before repatriation.;[e] 5. Earnings already taxed;to a U.S. shareholder of a controlled foreign corporation.;[f] 6. Ownership threshold for;U.S. shareholders to be deemed a controlled foreign corporation.;1019. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question MA #14 Match the definition with the correct;term.Foreign tax credit allowed for withholding taxes on payments from;foreign sources.Foreign tax credit allowed for income taxes paid by foreign;corporation.Requirement that the amount of any deemed paid foreign tax credit;be included in gross income.Direct ownership level before a deemed paid foreign;tax credit is allowed a U.S. owner of foreign corporation.Maximum percentage of;overall foreign loss that must be recaptured in any one year.A net loss in all;foreign tax credit limitation baskets.Number of foreign tax credit limitation;baskets after 2006.Number of tiers of foreign corporations from which a deemed;paid foreign tax credit is allowed.Direct credit Indirect credit Section 78 10;percent 50 percent Overall foreign loss Two Six;[a] 1. Foreign tax credit allowed;for withholding taxes on payments from foreign sources.;[b] 2. Foreign tax credit;allowed for income taxes paid by foreign corporation.;[c] 3. Requirement that the;amount of any deemed paid foreign tax credit be included in gross income.;[d] 4. Direct ownership level;before a deemed paid foreign tax credit is allowed a U.S. owner of foreign;corporation.;[e] 5. Maximum percentage of;overall foreign loss that must be recaptured in any one year.;[f] 6. A net loss in all;foreign tax credit limitation baskets.;[g] 7. Number of foreign tax;credit limitation baskets after 2006.;[h] 8. Number of tiers of;foreign corporations from which a deemed paid foreign tax credit is allowed.;1020. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question MA #22 Match the definition with the correct;term.Activity that creates the potential for effectively connected;income.Individual who is not a U.S. citizen or resident.U.S.-source income;usually interest, dividends, rents, and other portfolio items.Tax rules;governing U.S. taxation of foreign persons disposing of U.S. real;property.Income of foreign person taxed through filing of a U.S. tax return;with deductions allowed against gross income.Rule that requires determination;of the dividend equivalent amount.U.S. trade or business Nonresident alien FDAP;FIRPTA Effectively connected income Branch profits tax;[a] 1. Activity that creates the;potential for effectively connected income.;[b] 2. Individual who is not a;U.S. citizen or resident.;[c] 3. U.S.-source income;usually interest, dividends, rents, and other portfolio items.;[d] 4. Tax rules governing;U.S. taxation of foreign persons disposing of U.S. real property.;[e] 5. Income of foreign;person taxed through filing of a U.S. tax return with deductions allowed;against gross income.;[f] 6. Rule that requires;determination of the dividend equivalent amount.;f.;Branch profits tax;1021. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #1;During 2012, Martina, an NRA, receives interest income of $50,000 from Collins;Inc., an unrelated U.S. corporation. Considering the following facts related to;Collins? operations, what is the source of the interest income received by;Martina?;U.S.-source;Active foreign;Total gross;Year;income;business income;income;2009;$200,000;$;500,000;$ 700,000;2010;50,000;950,000;1,000,000;2011;100,000;900,000;1,000,000;Totals;$350,000;$2,350,000;$2,700,000;2012;$150,000;$;950,000;$1,100,000;1022. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #2;Goolsbee, Inc., a domestic corporation, generates U.S.-source and;foreign-source gross income. Goolsbee?s assets (tax book value) are as follows.;Generating;U.S.-source income;$15,000,000;Generating;foreign-source income;25,000,000;Total;$40,000,000;Goolsbee incurs interest expense of $200,000. Using the asset method and the;tax book value, apportion interest expense to foreign-source income.;1023. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #3;Arendt, Inc., a domestic corporation, purchases a piece of equipment for use in;its manufacture of custom pianos. The equipment is acquired in Ireland at a;cost of 200,000 euros when 1 euro: $1.25. Payment is due in 90 days. Arendt;acquires 200,000 euros and pays for the machine when 1 euro: $1.15. What is the;basis of the asset to Arendt and what is the foreign currency exchange gain or;loss, if any?;1024. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #4;KeenCo, a domestic corporation, is the sole shareholder of LovettCo, a controlled;foreign corporation. LovettCo has $250,000 in E & P attributable to income;not previously taxed to KeenCo and $200,000 E & P attributable to income;taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $125,000;dividend distribution to KeenCo. Ignoring any deemed paid credit implications;what is the U.S. gross income to KeenCo resulting from this dividend?;1025. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #5;Given the following information, determine if FanCo, a foreign corporation, is;a CFC.;Shareholders of;Voting;foreign corporation;power;Classification;Murray;25%;U.S. person;Nancy;24%;U.S. person;Otto;45%;Foreign;person;Patricia;6%;U.S. person;Patricia is Murray?s daughter.;1026. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #6;Present, Inc., a domestic corporation, owns 60% of the stock of Past, Inc., a;foreign corporation. For the current year, Present receives a dividend of;$80,000 from Past. Past?s pools of post-?86 E & P (after taxes) and foreign;taxes are $4,000,000 and $500,000, respectively. What is Present?s total gross;income from this dividend if it elects to claim the FTC for deemed-paid foreign;taxes?;Correct;Answer;Dividend;income is ?grossed up? for the deemed-paid foreign taxes. The deemed-paid;foreign taxes are calculated as follows. Thus, gross income from the dividend;is $90,000 ($80,000 + $10,000).;pr006-1.jpg;1027. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #7;Britta, Inc., a U.S. corporation, reports foreign-source income and pays;foreign taxes as follows.;Income;Taxes;Passive;category;$200,000;$ 10,000;General;limitation category;800,000;350,000;Britta?s worldwide taxable income is $1,600,000 and U.S. taxes before FTC are;$560,000 (assume a 35% tax rate). What is Britta?s U.S. tax liability after the;FTC?;1030. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #10;Freiburg, Ltd., a foreign corporation, operates a U.S. branch that reports;effectively connected U.S. earnings and profits (after income taxes) of;$800,000 for the tax year. The branch?s U.S. net equity at the beginning of the;tax year is $3 million and at the end of the tax year is $2.4 million. Freiburg;is organized in a nontreaty country. Compute Freiburg?s branch profits tax for;the year.;1031. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question ES #1;Discuss the primary purposes of income tax treaties.;1032. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question ES #2;The ? 367 cross-border transfer rules seem to counteract other favorable tax;provisions that allow the taxpayer to defer gross income, e.g. ?? 351 and 368.;What is the rationale for eliminating this deferral? Provide two examples of;transactions to which ? 367 would apply.;1033. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question ES #3;Certain portfolio income items (i.e., foreign personal holding company income);is included under the tax rules as Subpart F income for controlled foreign;corporations (CFCs). What is the rationale for taxing these income items?;Include two examples of foreign personal holding company income.;1034. CHAPTER;9?TAXATION OF INTERNATIONAL TRANSACTIONS Question ES #4;With respect to income generated by non-U.S. persons, does the U.S. apply a;?worldwide? or a ?territorial? approach. Be specific.

 

Paper#59232 | Written in 18-Jul-2015

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