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Exam 16: Multijurisdictional Taxation

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Question 21

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

A) Non-U.S. persons may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S. trade or business.
B) Non-U.S. persons are subject to U.S. income or withholding tax only if they are engaged in a U.S. trade or business.
C) Non-U.S. persons are not taxed on gains from U.S. real property as long as such property is not used in a U.S. trade or business.
D) Once a non-U.S. person is engaged in a U.S. trade or business, the non-U.S. person's worldwide income is subject to U.S. taxation.

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

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Question 22

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U.S. individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

A) True
B) False

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Question 23

Multiple Choice

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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?

USCo, a U.S. corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

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. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

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.

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

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Discuss the primary purposes of income tax treaties.

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

A domestic corporation is one whose assets are primarily located in the U.S. For this purpose, the primarily located test (>50%) applies.

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.

A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer. What is the significance of the term nexus when discussing state income taxation?

Flip Corporation operates in two states, as indicated below. All goods are manufactured in State A. Determine the sales to be assigned to both states to be used in computing Flip's sales factor for the year. Both states follow the UDITPA and the MTC regulations in this regard. ​ * Excess warehouse space, seasonal rental to a competitor. ** Land held for speculation.

Helene Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted. B uses a three-factor apportionment formula under which sales are double-weighted. C employs a single-factor apportionment factor, based solely on sales. Helene's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. ​ Helene's apportionable income assigned to A is:

Condor Corporation generated $450,000 of state taxable income from selling its product in States A and B. For the taxable year, the corporation's activities within the two states were as follows. ​ ​ Condor has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula that equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 5% and 3%, respectively. Determine Condor's state income tax liability.

A unitary business applies a combined apportionment formula, including data from operations of all of the affiliates.

Winnie, Inc., a U.S. corporation, receives a dividend of $400,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Winnie elects the FTC, its gross income attributable to this dividend is $400,000.

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

Which of the following statements regarding the sourcing of gross income is true?