Deck 9: Taxation of International Transactions

Question 1

Archie, a U.S.resident, receives $120,000 of foreign-source passive category income on which foreign taxes of $22,500 are withheld.His worldwide taxable income is $300,000 (before personal exemptions).Archie's U.S.tax liability before FTC is $70,000.What is Archie's FTC?

A)$0.
B)$22,500.
C)$27,695.
D)$28,000.
E)None of the above.

Answer 1

B

Question 2

The following persons own Rome Corporation, a foreign corporation. $$\begin{array} { l l } \text { Freddy, U.S. individual } & 25 \% \\\text { Jeffrey, U.S. individual } & 20 \% \\\text { Kyle, U.S. individual } & 8 \% \\\text { Jerome, U.S. individual } & 15 \% \\\text { Juan, foreign individual } & 32 \%\end{array}$$ Kyle is Freddy's son.None of the other shareholders are related.Subpart F income for the tax year is $500,000.No distributions are made.Which of the following statements is correct?

A)Rome Corporation is not a CFC.
B)Juan includes $160,000 in gross income.
C)Kyle includes $40,000 in gross income.
D)Kyle is not a U.S.shareholder.
E)None of the above statements is correct.

Answer 2

Kyle includes $40,000 in gross income.

Question 3

Geneva Corporation, a foreign corporation, has a U.S.branch that generates effectively connected earnings and profits (after income taxes) of $200,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $1,000,000 and at the end of the tax year is $850,000.Geneva' branch profits tax for the year is:

A)$0.
B)$15,000.
C)$60,000.
D)$105,000.
E)None of the above.

Answer 3

D

Question 4

Phoenix, Inc., a U.S.shareholder owns 100% of a CFC from which Phoenix receives a $650,000 distribution.The CFC's E & P is composed of the following amounts.
-$400,000 attributable to previously taxed increases in investment in U.S.property.
-$200,000 attributable to previously taxed Subpart F income.
-$100,000 attributable to other E & P.
Phoenix recognizes a taxable dividend of:

A)$650,000.
B)$600,000.
C)$200,000.
D)$50,000.
E)None of the above.

Question 5

Transfer of certain "tainted" assets outside the U.S.triggers immediate gain recognition."Tainted assets" include:

A)Foreign currency.
B)Property leased by the transferor.
C)Finished goods inventory.
D)Accounts receivable.
E)All of the above.

Question 6

Amsterdam Corporation, a foreign corporation, has a U.S.branch that generates effectively connected earnings and profits (after income taxes) of $700,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $3,500,000 and at the end of the tax year is $4,000,000.Amsterdam's branch profits tax for the year is:

A)$360,000.
B)$210,000.
C)$60,000.
D)$-0-.
E)None of the above.

Question 7

Omaha Inc., a domestic corporation, has worldwide taxable income of $1,300,000, including a $400,000 dividend from Montreal, Ltd., a § 902 noncontrolled foreign corporation.Omaha's U.S.tax liability before FTC is $455,000.Omaha owns 15% of Montreal.Montreal's post-1986 E & P after taxes is $10,000,000.It has paid foreign taxes of $6,000,000 attributable to post-1986 E & P.Omaha's deemed-paid foreign taxes with regard to the dividend from Montreal are:

A)$0.
B)$140,000.
C)$500,000.
D)$240,000.
E)None of the above..

Question 8

Freddy, a U.S.resident, receives $60,000 of foreign-source passive category income on which foreign taxes of $25,000 are withheld.His worldwide taxable income is $230,000.Freddy's U.S.tax liability before FTC is $80,000.Assuming a personal exemption of $3,100, what is Freddy's FTC?

A)$-0-.
B)$20,574.
C)$20,869.
D)$25,000.
E)None of the above.