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 ofinterest 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?

Question

Quizplus · Accepted Answer

Dividend income, interest income from a U.S. bank, and capital gain from sale of stock in a U.S. corporation are all subject to U.S. withholding tax. Therefore, $5,000 + $10,000 + $2,000 = $17,000 is subject to U.S. taxation. The interest income earned from a loan to a U.S. citizen is not subject to U.S. taxation. Therefore, the amount subject to U.S. taxation is $17,000 - $3,000 = $14,000. However, Australia has a tax treaty with the U.S. that reduces the withholding tax on dividends, interest, and capital gains. Therefore, the final amount subject to U.S. taxation may be less than $14,000 depending on the specifics of the tax treaty.

Russell Starling, an Australian Citizen and Resident, Received the Following