The income of foreign corporation doing business in the United States
I.Is taxed like a U.S. corporation if it is effectively connected trade or business income.
II.Is taxed at a flat rate of 30% if it is interest and dividend income.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

The income of foreign corporation doing business in the United States
I.Is taxed like a U.S. corporation if it is effectively connected trade or business income.
II.Is taxed at a flat rate of 30% if it is interest and dividend income.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Both statements are correct. Statement I is accurate because foreign corporations engaged in a U.S. trade or business with effectively connected income are taxed on that income in a manner similar to U.S. corporations. Statement II is correct because, generally, interest and dividend income from U.S. sources received by a foreign corporation not connected with a U.S. trade or business is subject to a 30% tax rate, unless a treaty specifies a lower rate.

The Income of Foreign Corporation Doing Business in the United