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Exam 16: Multijurisdictional Taxation

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Question 41

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Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

A) Foreign persons with U.S.activities.
B) Foreign persons with only foreign activities.
C) U.S.employees working abroad.
D) U.S.persons with foreign activities.

E) C) and D)
F) B) and D)

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Question 42

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The model law relating to the assignment of income among the states for corporations is:

A) Public Law 86-272.
B) The Multistate Tax Treaty.
C) The Multistate Tax Commission (MTC) .
D) The Uniform Division of Income for Tax Purposes Act (UDITPA) .

E) B) and C)
F) B) and D)

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Question 43

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Which of the following is not a foreign person?

USCo,a U.S.corporation,purchases inventory from distributors within the U.S.and resells this inventory to customers outside the U.S. ,with title passing outside the U.S.Profit on the sale is $10,000.What is the source of the USCo's inventory sales income?

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S.multinational business.

Peanut,Inc. ,a U.S.corporation,receives $500,000 of foreign-source interest income,on which foreign taxes of $5,000 are withheld.Peanut's worldwide taxable income is $900,000,and its U.S.Federal income tax liability before FTC is $270,000.What is Peanut's foreign tax credit?

Your client holds foreign tax credit (FTC)carryforwards,i.e. ,it is in an "excess credit" position.Give at least three planning ideas that the client should implement,so as to free up the suspended FTCs.

Jaime received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000.Jaime's total U.S.tax liability is $800,000 (the 35% marginal tax rate applies).Jaime's current year FTC is $87,500.

Krebs,Inc. ,a U.S.corporation,operates an unincorporated branch manufacturing operation in the U.K.Krebs,Inc. ,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return,along with $1,600,000 of taxable income from its U.S.operations.The U.K.branch income is all general limitation basket income.Krebs paid $270,000 in U.K.income taxes related to the $900,000 in branch income.Assuming a U.S.tax rate of 35%,what is Krebs' U.S.tax liability after any allowable foreign tax credits?

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly,indirectly,and constructively at least 50% of the voting power of a foreign corporation.

Without the foreign tax credit,double taxation would result when:

OutCo,a controlled foreign corporation in Meena,earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the dividend payors are located in Meena.OutCo's Subpart F income for the year is:

Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

Nonbusiness income receives tax-exempt treatment under all state corporate income taxes.

General Corporation is taxable in a number of states.This year,General made a $100,000 sale from its A headquarters to a customer in B.This activity is not sufficient for General to create nexus with B.State A applies a throwback rule,but State B does not.In which state(s) will the sale be included in the sales factor numerator?

Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

Waltz,Inc. ,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

Carol,a citizen and resident of Adagio,reports gross income that is effectively connected with a U.S.business.No deductions are allowed against this income,and Carol's U.S.tax rate is a flat 30 percent.

Which of the following statements regarding the U.S.taxation of non-U.S.persons is true?