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Exam 25: Taxation of International Transactions

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Question 21

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Discuss the primary purposes of income tax treaties.

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The primary purpose of an income tax tre...

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Question 22

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Match the definition with the correct term. -Bilateral agreement between two countries related to tax issues.

A) Inbound
B) Outbound
C) Allocation and apportionment
D) Qualified business unit
E) Tax haven
F) Income tax treaty
G) Section 482

H) D) and F)
I) D) and G)

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Question 23

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Freda was born and continues to live in Uruguay. She exports widgets to U.S. customers. The United States does not have in force an income tax treaty with Uruguay. Freda's net U.S. income from the widgets is subject to a flat 30% Federal income tax rate.

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

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Section 482 is used by the U.S. Treasury to:

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Which of the following is not a U.S. person?

GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations. Ferrell owns the other 60 percent of Shane Corporation. Both Shane and Ferrell are CFCs.

Match the definition with the correct term. -Individual who is not a U.S. citizen or resident.

A tax haven often is:

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

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.-source?

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

A U.S. business conducts international communications activities between the United States. and Spain. The resulting income is sourced 100% to the United States, the residence of the taxpayer.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation.

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the United States other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax basis) are as follows. $\begin{array}{lr}\text { Generating U.S.-source income } & \$ 15,000,000 \\\text { Generating foreign-source income } & 25,000,000 \\\text { Total } & \$ 40,000,000\end{array}$ Goolsbee incurs interest expense of $200,000. Apportion interest expense to foreign-source income.