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Exam 16: Us Taxation of Foreign-Related Transactions

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Question 1

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U.S.citizen Patrick is a bona fide resident of a foreign country for all of the current year.Patrick uses a calendar year as his tax year.He has $100,000 of self-employment income and incurs $20,000 in housing expenses.The base housing cost amount is $15,616.The deduction for housing expenses is

A) $13,184 for AGI.
B) $13,184 from AGI.
C) $4,384 for AGI.
D) $6,816 from AGI.

E) None of the above
F) All of the above

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Question 2

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Jose,a U.S.citizen,has taxable income from U.S.sources of $15,000 and taxable income from a foreign country of $35,000.Assume the U.S.tax rate is 25% and Jose paid $12,000 in taxes to the foreign country.What foreign tax credit can be claimed by Jose?

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^a$12,500 ×...

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Question 3

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Identify which of the following statements is true.

Income is "effectively connected" with the conduct of a U.S.business only if

Zeta Corporation,incorporated in Country Z,is 100% owned by Zelda Corporation,a U.S.corporation.Zelda purchases some machines from an unrelated corporation,for use in Country A.The portion of the sales contract covering installation and maintenance of the machines is assigned by Zelda to Zeta.Zeta is to be paid for these services by Zelda.Does this qualify as foreign base company services income?

U.S.citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign-earned income exclusion for 60 days in 2010;365 days in 2011;and 60 days this year,2012.The maximum earned income exclusion for this year is?

Domestic corporation X owns all the stock of controlled foreign corporation (CFC) T.X's acquisition cost for the CFC investment is $150,000.The CFC reports E&P of $200,000 since the domestic corporation acquired its interest,of which $120,000 was Subpart F income.The CFC makes a cash distribution of $90,000 to the domestic corporation.What is the domestic corporation's basis for its investment in T immediately after the cash distribution?

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has $3,000 of interest income earned on a bank account in his home country and $1,800 of interest income earned on a bank account located in Addison,Illinois.How will the interest be taxed and how will the tax be collected?

Alan,a U.S.citizen,works in Germany and earns $70,000,paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's excess foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

Nonresident aliens are not allowed to claim the standard deduction.

Under the Subpart F rules,controlled foreign corporations (CFCs)are required to distribute a certain portion of their income as dividends to their U.S.shareholders.

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has a $15,000 capital gain on the sale of stock in a U.S.corporation while he was in the United States.The capital gain is not connected to his trade or business.How will the capital gain be taxed and how will the tax be collected?

Michael,a U.S.citizen,earned $100,000 of foreign-earned income and no other U.S.or foreign income in 2013.He also incurred $10,000 of employment-related expenses,none of which were reimbursed.If the full foreign-earned income exclusion is utilized,calculate the deductible employment-related expense (before the 2% nondeductible floor).

Jacque,a single nonresident alien,is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has $75,000 of sales income earned while in the United States and $30,000 of non-U.S.sales income earned while he was outside the United States.How will the income be taxed and how will the tax be collected?

Music Corporation is a CFC incorporated in Country M.Music receives interest and dividends from its two foreign subsidiary corporations,Sharp Corporation and Flat Corporation.Sharp is incorporated in Country S and conducts all of its activities in that country.Flat is incorporated in Country M and conducts all of its activities in that country.Are the interest and dividends received by Music Corporation FPHCI?

What is a corporate inversion and why was this provision enacted?

What are the carryback and carryforward periods for the foreign tax credit?

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in Country T.In its first year of operations,Foreign Corporation earns 60,000 frugs of E&P,pays a 40,000- frug dividend,and pays 5,000 frugs in income taxes.The exchange rate between the dollar and the frug is: first year average,1 frug = $0.20;yearend,1 frug = $0.25;tax payment date,1 frug = $0.30;and dividend payment date,1 frug = $0.28.What is the translated dividend amount?

Discuss the Sec.482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower-than-normal price.

Overseas business activities conducted by U.S.corporations receive which one of the following favorable tax breaks?