Question 1

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows.  
​
Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

Accepted Answer

The answer of Goolsbee, Inc., a U.S. corporation, generates U.S.-source...

Question 2

USCo, a U.S. corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Accepted Answer

The answer of USCo, a U.S. corporation, reports worldwide taxable...

Question 3

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Accepted Answer

Dividend withholding taxes may be eligible for the foreign tax credit. Real property taxes, value added taxes, and sales taxes are not eligible for the foreign tax credit.

Question 4

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

Accepted Answer

The answer of Your client holds foreign tax credit (FTC)...

Question 5

Match the definition with the correct term
-U.S. taxpayers earning income outside the United States.

Accepted Answer

Outbound refers to U.S. taxpayers earning income outside the United States.

Question 6

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Accepted Answer

The answer of With respect to income generated by non-U.S....

Question 7

USCo, a U.S. corporation, reports worldwide taxable income of $500,000, including a $100,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's undistributed earnings and profits are $1 million and it has paid $200,000 of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Accepted Answer

The answer of USCo, a U.S. corporation, reports worldwide taxable...

Question 8

Match the definition with the correct term
-Method for sourcing income and deductions.

Accepted Answer

Allocation and apportionment is the method used for sourcing income and deductions. Inbound and outbound refer to the direction of transactions (into or out of the country). Qualified business unit refers to a separate unit of a larger multinational corporation. Tax haven refers to a country with favorable tax laws. Income tax treaty is an agreement between two countries regarding taxation. Section 482 deals with transfer pricing.

Question 9

USCo, a U.S. corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Accepted Answer

The answer of USCo, a U.S. corporation, receives $700,000 of...

Question 10

Given the following information, determine if FanCo, a foreign corporation, is a CFC.  
Patricia is Murray's daughter.

Accepted Answer

The answer of Given the following information, determine if FanCo,...

Question 11

Which of the following statements is true, regarding the sourcing of dividend income?

Accepted Answer

According to the U.S. tax law, dividend income received from a U.S. corporation is considered U.S.-source income, regardless of where the corporation generated the earnings and profits (E&P). Therefore, dividend income is sourced based on the location of the payor, not the recipient. Option A is incorrect because the sourcing is based on the payor, not the recipient. Option B is incorrect because the percentage of U.S.-source income earned by the U.S. payor does not impact the sourcing of dividend income. Option D is incorrect because dividends from a U.S. corporation are always considered U.S.-source income.

Question 12

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Accepted Answer

The primary purpose of the Subpart F income provisions is to prevent U.S. taxpayers from shifting their income to low-tax non-U.S. jurisdictions. These provisions ensure that certain types of income earned by controlled foreign corporations (CFCs) are immediately subject to U.S. taxation, regardless of whether or not the income is repatriated to the U.S.

Question 13

KeenCo, a U.S. 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. LovettCo also holds $200,000 E & P attributable to income taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $150,000 dividend distribution to KeenCo. Ignoring any deemed paid credit implications, what is the U.S. gross income to KeenCo resulting from this dividend?

Accepted Answer

The answer of KeenCo, a U.S. corporation, is the sole...

Question 14

BrazilCo, Inc., a foreign corporation with a U.S. trade or business, has U.S.-source income as follows.  
Determine BrazilCo's total U.S. tax liability for the year, assuming a 35% corporate rate and no tax treaty. BrazilCo leaves its U.S. branch profits invested in the United States, and it does not otherwise repatriate any of its U.S. assets during the year.

Accepted Answer

The answer of BrazilCo, Inc., a foreign corporation with a...

Question 15

Present, Inc., a U.S. 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 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?

Accepted Answer

The answer of Present, Inc., a U.S. corporation, owns 60%...

Question 16

Match the definition with the correct term
-Bilateral agreement between two countries related to tax issues.

Accepted Answer

An income tax treaty is a bilateral agreement between two countries related to tax issues.

Answer: E
 A tax haven is a country or jurisdiction with very low or no tax rates.

Answer: G
 Section 482 refers to the Internal Revenue Code section that provides for the allocation of income and deductions among related entities to prevent the evasion of taxes.

Note: The remaining options are not related to the given definition. Inbound and outbound refer to international trade, allocation and apportionment refers to the allocation of income and expenses within a company, and qualified business unit refers to a separate division of a business.

Question 17

Match the definition with the correct term
-Foreign taxpayers earning income inside the United States.

Accepted Answer

Inbound refers to foreign taxpayers earning income inside the United States.

Answer: B
 Outbound refers to U.S. taxpayers earning income outside the United States.

Answer: C
 Allocation and apportionment is the process of assigning income and deductions to the state(s) in which the income was earned.

Answer: D
 Qualified business unit is a separate and distinct unit of a corporation that is engaged in business operations in a foreign country.

Answer: E
 Tax haven is a country or jurisdiction that offers favorable tax treatment to individuals and businesses.

Answer: F
 Income tax treaty is a bilateral agreement between two countries that sets out the rules for taxation of income earned by residents of one country in the other country.

Answer: G
 Section 482 is a provision of the Internal Revenue Code that allows the IRS to adjust transfer prices between related entities to ensure that prices are set at arm's length.

Question 18

Which of the following statements regarding the sourcing of gross income is true?

Accepted Answer

Certain U.S.-source investment income earned by non-U.S. persons not engaged in a U.S. trade or business may be subject to a U.S. withholding tax. U.S.-source income is generally subject to U.S. taxation, even if the recipient is not a U.S. person. Withholding taxes are imposed on such income to ensure that the U.S. tax liability is paid, even if the recipient does not file a U.S. tax return. However, many countries have negotiated tax treaties with the U.S. that reduce or eliminate the withholding tax on certain types of income.

Question 19

Given the following information, determine whether Greta, an alien, is a U.S. resident for Year 3. Greta cannot establish a tax home in or a closer connection to a foreign country.

Accepted Answer

The answer of Given the following information, determine whether Greta,...

Question 20

Which of the following statements is true, regarding the sourcing of dividend income?

Accepted Answer

The answer of Which of the following statements is true,...

Quiz 9: Taxation of International Transactions

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

Match the definition with the correct term -U.S. taxpayers earning income outside the United States.

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Match the definition with the correct term -Method for sourcing income and deductions.

USCo, a U.S. corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

Which of the following statements is true, regarding the sourcing of dividend income?

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Match the definition with the correct term -Bilateral agreement between two countries related to tax issues.

Match the definition with the correct term -Foreign taxpayers earning income inside the United States.

Which of the following statements regarding the sourcing of gross income is true?

Given the following information, determine whether Greta, an alien, is a U.S. resident for Year 3. Greta cannot establish a tax home in or a closer connection to a foreign country.

Which of the following statements is true, regarding the sourcing of dividend income?

Quiz 9: Taxation of International Transactions

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. ​ Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

Match the definition with the correct term -U.S. taxpayers earning income outside the United States.

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Match the definition with the correct term -Method for sourcing income and deductions.

USCo, a U.S. corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

Which of the following statements is true, regarding the sourcing of dividend income?

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Match the definition with the correct term -Bilateral agreement between two countries related to tax issues.

Match the definition with the correct term -Foreign taxpayers earning income inside the United States.

Which of the following statements regarding the sourcing of gross income is true?

Given the following information, determine whether Greta, an alien, is a U.S. resident for Year 3. Greta cannot establish a tax home in or a closer connection to a foreign country.

Which of the following statements is true, regarding the sourcing of dividend income?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.