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Exam 13: The Ustaxation of Multinational Transactions

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Question 1

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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?

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Yes
Using the formula,Natsumi is treated...

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Question 2

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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?

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$160,000
Foreign source income...

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Question 3

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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?

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?

Ypsi Corporation has a precredit U.S.tax of $780,000 on $2,000,000 of taxable income in 2017.Ypsi has $400,000 of foreign source taxable income characterized as general category income and $150,000 of foreign source taxable income characterized as passive category income.Ypsi paid $180,000 of foreign income taxes on the general category income and $30,000 of foreign income taxes on the passive category income.What amount of foreign tax credit (FTC)can Ypsi use on its 2017 U.S.tax return and what is the amount of the FTC carryforward,if any?

A rectangle with an inverted triangle within it is a symbol used to represent what organizational form?

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?

Vintner,S.A.,a French corporation,received the following sources of income during 2017: $20,000 interest income from a loan to its 100 percent owned U.S.subsidiary. $30,000 dividend income from its 100 percent owned Canadian subsidiary. $100,000 royalty income from its Irish subsidiary for use of a trademark within the United States. $100,000 rent income from its Mexican subsidiary for use of a warehouse located in Arizona. $50,000 capital gain from sale of stock in its 40 percent owned German joint venture.Title passed in the United States. What amount of U.S.source income does Vintner have in 2017?

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?

Rainier Corporation,a U.S.corporation,manufactures and sells quidgets in the United States and Europe.Rainier conducts its operations in Europe through a German GmbH,which the company elects to treat as a branch for U.S.tax purposes.Rainier also licenses the rights to manufacture quidgets to an unrelated company in China.During the current year,Rainier paid the following foreign taxes,translated into U.S.dollars at the appropriate exchange rate: What amount of creditable foreign taxes does Rainier incur?

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.

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?

Kiwi Corporation is a 100 percent owned Australian subsidiary of Exotic Fruit Corporation,a U.S.corporation.Kiwi had post-1986 earnings and profits of 1,000,000 Australian dollars (AUD)and post-1986 foreign taxes of $225,000.During the current year,Kiwi paid a dividend of 250,000 AUD to Exotic Fruit.Assume an exchange rate of 1 AUD = $0.75.No withholding tax was imposed on the dividend.What amount of taxable income does the dividend generate on Exotic's U.S.tax return?

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

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.

Which of the following transactions engaged in by a Swiss controlled foreign corporation creates foreign base company sales income?

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.

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.

Sushi Corporation is a 100 percent owned Japanese subsidiary of Squid,Inc.,a U.S.corporation.Sushi had post-1986 earnings and profits of ¥120,000,000 and post-1986 foreign taxes of $800,000.During the current year,Sushi paid a dividend of ¥60,000,000 to Squid.The dividend was characterized as general category income for FTC purposes.The dividend was subject to a 0 percent withholding tax.Assume an exchange rate of ¥1 = $0.010.Squid reported U.S.taxable income of $2,000,000.Squid's U.S.tax rate is 34 percent.Compute Squid's net U.S.tax liability for the current year and excess FTC,if any.

Obispo,Inc.,a U.S.corporation,received the following sources of income during 2017: $20,000 interest income from a loan to its 100 percent owned U.S.subsidiary. $30,000 dividend income from its 100 percent owned Canadian subsidiary. $50,000 royalty income from its Irish subsidiary for use of a trademark within the United States. $40,000 rent income from its Dutch subsidiary for use of a warehouse located in Belgium. $3,000 capital gain from sale of stock in its 40 percent owned Mexican joint venture.Title passed in the United States. What amount of foreign source income does Obispo have in 2017?