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Exam 25: Taxation of International Transactions

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Question 21

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Zhang, an NRA who is not a resident of a treaty country, receives taxable dividends of $50,000 from U.S. corporations. Zhang does not conduct a U.S. trade or business. Zhang's dividends are subject to withholding by the payor of:

A) 35%.
B) 30%.
C) 15%.
D) 0%.

E) B) and C)
F) All of the above

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Question 22

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Match the definition with the correct term. -Rule that requires determination of the dividend equivalent amount.

A) Expatriate
B) Resident
C) Nonresident alien
D) U.S. trade or business
E) Branch profits tax
F) Effectively connected income

G) C) and E)
H) B) and E)

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Question 23

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Which of the following situations requires the filing of an information return with the U.S. government?

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

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.

Jokerz, a CFC of a U.S. parent, generated $80,000 Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

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

During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for $350,000, with title passing to the buyer in France. USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income. USACo's adjusted basis in the equipment is $20,000 on the date of sale. What is the source of the $330,000 gain on the sale of this equipment?

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

Columbia, Inc., a U.S. corporation, receives a $150,000 cash dividend from Starke, Ltd. Columbia owns 15% of Starke. Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P. What is Columbia's gross income related to the Starke dividend?

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

A non­U.S. individual's "green card" remains in effect until:

The following persons own Schlecht Corporation, a foreign corporation. $\begin{array}{llr} \text {Jim, U.S. individual } &35\%\\ \text { Gina, U.S. individual} &15\%\\ \text {Marina, U.S. individual } &8\%\\ \text { Pedro, U.S. individual } &12\%\\ \text {Chee non-U S individual } &30\%\\\end{array}$ None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

LocalCo merges into HeirCo, a non­U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax­deferred under U.S. income tax law, using §§ 351 and 368.

Xenia, Inc., a U.S. shareholder, owns 100% of Fredonia, a CFC. Xenia receives a $3 million cash distribution from Fredonia. Fredonia's E & P is composed of the following amounts. -$500,000 attributable to previously taxed increases in investment in U.S. property. -$1,500,000 attributable to previously taxed Subpart F income. -$4,800,000 attributable to other E & P. Xenia recognizes a taxable dividend of:

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.80€. Wood's exchange gain or loss is:

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

Which of the following statements is true, regarding the sourcing of dividend income?

Section 482 is used by the Treasury to:

When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.