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Exam 9: Taxation of International Transactions

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Question 91

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Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Maximum years for a foreign tax credit carryforward.

A) Indirect credit
B) Direct credit
C) One
D) Two
E) Ten
F) Twenty
G) Gross-up (§ 78)
H) Overall foreign loss

I) C) and D)
J) D) and G)

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Question 92

Multiple Choice

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Which of the following statements regarding income sourcing is not correct?

A) Concerning the foreign tax credit, most U.S. persons benefit from earning low-tax foreign-source income.
B) Foreign persons generally benefit from avoiding U.S.-source income classification.
C) U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system.
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States.

E) A) and C)
F) B) and C)

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Question 93

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Which of the following is not a foreign person?

WorldCo, a foreign corporation not engaged in a U.S. trade or business, receives $50,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 78% of its income from foreign sources. How much of WorldCo's interest income is U.S. source?

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Zhang, an NRA who is not a resident of a treaty country, receives taxable dividends of $50,000 from U.S. corporations. Zhang does not conduct a U.S. trade or business. Zhang's dividends are subject to withholding by the payor of:

BrazilCo, Inc., a foreign corporation with a U.S. trade or business, has U.S.-source income as follows. Dividend income from unrelated investment activities $ 50,000 Net U.S.-source effectively connected income 600,000 ​ 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.