Deck 13: The Ustaxation of Multinational Transactions

Question 1

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.

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

Deductible interest expense incurred by a U.S.corporation will always be treated as a U.S.source deduction.

Answer 3

False

Question 4

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.

Question 5

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.

Question 6

The United States generally taxes U.S.sourced fixed and determinable,annual or periodic income (FDAP)earned by non-U.S.persons by applying a withholding tax to the gross amount of income.

Question 7

"Outbound taxation" deals with the U.S.tax rules that apply to U.S.persons doing business outside the United States.

Question 8

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.

Question 9

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.

Question 10

All taxes paid to a foreign government by a U.S.corporation are creditable on the corporation's U.S.tax return.

Question 11

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.

Question 12

Nexus involves the criteria used by a government to assert its right to tax a person or transaction within or without its borders.

Question 13

Philippe is a French citizen.During 2017 he spent 150 days in the United States on business.Because Philippe does not spend 183 days in the United States in 2017,he will not under any circumstances be treated as a resident alien for U.S.tax purposes.

Question 14

Alex,a U.S.citizen,became a resident of Belgium in 2017.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.

Question 15

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.

Question 16

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.

Question 17

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.

Question 18

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.

Question 19

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.

Question 20

U.S.individuals and corporations are eligible for a deemed-paid credit on dividends received from foreign corporations.

Question 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.

Question 22

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 2017?

A) Charles spent 183 days in the United States in 2017 and has his tax home in England.
B) Charles spent 183 days in the United States in 2017 and has his tax home in the United States.
C) Charles spent 182 days in the United States in 2017 and has his tax home in England.
D) Charles spent 182 days in the United States in 2017 and has his tax home in the United States.

Question 23

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.

Question 24

Austin Corporation,a U.S.corporation,received the following investment income during 2017: $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 2017?

A) $140,000.
B) $110,000.
C) $70,000.
D) $60,000.

Question 25

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.

Question 26

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.Under the 50/50 method,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.

Question 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.

Question 28

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.Under the 50/50 method,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.

Question 29

Guido was physically present in the United States for 150 days in 2017,120 days in 2016,and 90 days in 2015.Under the substantial presence test formula,how many days is Guido deemed physically present in the United States in 2017?

A) 360.
B) 205.
C) 190.
D) 150.

Question 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.

Question 31

A Japanese corporation owned by eleven U.S.individuals cannot be treated as a controlled foreign corporation for U.S.tax purposes.

Question 32

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 while working 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.

Question 33

Russell Starling,an Australian citizen and resident,received the following investment income during 2017: $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 2017?

A) $20,000.
B) $15,000.
C) $10,000.
D) $8,000.

Question 34

Gwendolyn was physically present in the United States for 90 days in 2017,180 days in 2016,and 30 days in 2015.Under the substantial presence test formula,how many days is Gwendolyn deemed physically present in the United States in 2017?

A) 300.
B) 155.
C) 150.
D) 90.

Question 35

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 equivalent 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 equivalent using a formula that includes the current year and the prior year.

Question 36

All passive income earned by a CFC will be treated as foreign personal holding company income under subpart F for U.S.tax purposes.

Question 37

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.

Question 38

Saginaw Steel Corporation has a precredit U.S.tax of $170,000 on $500,000 of taxable income in 2017.Saginaw 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.Saginaw's foreign tax credit on its 2017 tax return will be:

A) $102,000.
B) $80,000.
C) $68,000.
D) $32,000.

Question 39

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.

Question 40

Ames Corporation has a precredit U.S.tax of $340,000 on $1,000,000 of taxable income in 2017.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 2017 tax return will be:

A) $72,000.
B) $120,000.
C) $204,000.
D) $340,000.

Question 41

Knoxville Corporation,a U.S.corporation,incurred $300,000 of research and experimental (R&E)expenses during 2017.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.

Question 42

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.

Question 43

Camellia Corporation,a U.S.corporation,incurred $600,000 of research and experimental (R&E)expenses during 2017.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.

Question 44

Pierre Corporation has a precredit U.S.tax of $510,000 on $1,500,000 of taxable income in 2017.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 2017 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.

Question 45

Manchester Corporation,a U.S.corporation,incurred $100,000 of interest expense during 2017.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.

Question 46

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.sourced taxable income of $2,000,000 before considering the dividend received from Horton Corporation.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.

Question 47

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.

Question 48

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%.

Question 49

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 B and C are correct.

Question 50

Bismarck Corporation has a precredit U.S.tax of $340,000 on $1,000,000 of taxable income in 2017.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 2017 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.

Question 51

Hanover Corporation,a U.S.corporation,incurred $300,000 of interest expense during 2017.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.

Question 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.

Question 53

Which of the following tax rules applies to an excess foreign tax credit (FTC)that arises in 2017?

A) The excess FTC is first carried back to 2016 and any excess is carried forward for 10 years.
B) The excess FTC is first carried back to 2015, then 2016, and any excess is carried forward for 20 years.
C) The excess FTC is first carried back to 2014, then 2015, then 2016, and any excess is carried forward for 5 years.
D) The excess FTC is carried forward 10 years, with no carryback allowed.

Question 54

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.

Question 55

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.

Question 56

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.

Question 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.

Question 58

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 in the scenarios listed above are classified as passive category income.

Question 59

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.

Question 60

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.

Question 61

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.

Question 62

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.

Question 63

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.

Question 64

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.

Question 65

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 2015,Nicole came to the United States on business and stayed for 180 days.She came to the United States again on business in 2016 and stayed for 150 days.In 2017 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 2017 under the substantial presence test?

Question 66

Reno Corporation,a U.S.corporation,reported total taxable income of $6,000,000 in 2017.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 C$720,000 on its branch income.Compute Reno's net U.S.tax liability and any foreign tax credit carryover for 2017.Use a U.S.corporate tax rate of 34%.Assume an exchange rate of C$1 = $1.

Question 67

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.

Question 68

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.

Question 69

Holmdel,Inc.,a U.S.corporation,received the following sources of income during 2017:
$10,000 interest income from a loan to its 100 percent owned Swiss subsidiary.
$50,000 dividend income from its 100 percent owned French subsidiary.
$100,000 royalty income from its Bermuda subsidiary for use of a trademark outside the United States.
$25,000 rent income from its Canadian subsidiary for use of a warehouse located in New Jersey.
$50,000 capital gain from sale of stock in its 40 percent owned Japanese joint venture.Title passed in Japan.
What amount of foreign source income does Holmdel have in 2017?

Question 70

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.

Question 71

Before subpart F applies,a foreign corporation must be a CFC for how many consecutive days?

A) 1.
B) 30.
C) 183.
D) 365.

Question 72

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.

Question 73

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.

Question 74

Which of the following exceptions could cause subpart F income to be excluded from the deemed dividend regime?

A) The full inclusion rule only.
B) The de minimis rule only.
C) The high tax rule only.
D) The de minimis rule and the high tax rule could cause subpart F income to be excluded from the deemed dividend regime.

Question 75

Boca Corporation,a U.S.corporation,reported U.S.taxable income of $1,000,000 in 2017.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 2017.Assume a U.S.tax rate of 34 percent.

A) $335,625.
B) $327,500.
C) $327,375.
D) $323,125.

Question 76

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.

Question 77

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.

Question 78

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 the above named persons are U.S. shareholders for subpart F purposes.

Question 79

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 2015,Natsumi came to the United States on business and stayed for 240 days.She came to the United States again on business in 2016 and stayed for 120 days.In 2017 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 2017 under the substantial presence test?

Question 80

Appleton Corporation,a U.S.corporation,reported total taxable income of $10,000,000 in 2017.Taxable income included $2,500,000 of foreign source taxable income from the company's branch operations in the United Kingdom.All of the branch income is general category income.Appleton paid U.K.income taxes of $750,000 on its branch income.Compute Appleton's net U.S.tax liability and any foreign tax credit carryover for 2017.Assume a U.S.corporate tax rate of 34%.