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Exam 24: The Ustaxation of Multinational Transactions

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Question 51

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A U.S.corporation reports its foreign tax credit computation on which tax form?

A) Form 1116
B) Form 1118
C) Form 1120
D) Form 8832

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

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Question 52

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Which of the following is not a benefit derived from an income tax treaty between the United States and another country?

A) Lower withholding tax rates imposed on cross-border dividend and interest payments.
B) A higher threshold for determining when a person has nexus in the other country.
C) Lower statutory tax rates imposed on effectively connected income (ECI) earned by a resident of one country in the other country.
D) A higher threshold before an individual is considered a resident of the other country for tax purposes.

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

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Question 53

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Polka Corporation is a 100 percent owned Polish subsidiary of Pierogi Inc.,a U.S.corporation.During the current year,Polka paid a dividend of €525,000 to Pierogi.The dividend was subject to a withholding tax of €26,250.Assume an exchange rate of €1 = $1.50.Pierogi reported U.S.taxable income of $1,000,000.Compute Pierogi's net U.S.tax liability for the current year and excess FTC,if any.

Under which of the following scenarios could Charles,a citizen of England,be eligible to claim the "closer connection" exception to the substantial presence test in 2019?

Spartan Corporation,a U.S.company,manufactures widgets for sale in the United States and Europe.All manufacturing activities take place in the United States.During the current year,Spartan sold 100,000 widgets to European customers at a price of $5 each.Each widget costs $2 to produce.All of Spartan's production assets are located in the United States.Spartan ships its widgets FOB,place of destination.What amount of Spartan's gross profit is treated as coming from foreign sources?

Which of the following tax benefits does not arise when a U.S.corporation forms a corporation in Ireland through which to earn business profits in Ireland?

Janet Mothra,a U.S.citizen,is employed by Caterpillar Corporation,a U.S.corporation.In May 2019,Caterpillar relocated Janet to its operations in Spain for the remainder of 2019.Janet was paid a salary of $200,000.As part of her compensation package for moving to Spain,Janet received a housing allowance of $40,000.Janet's salary was earned ratably over the 12-month period.During 2019 Janet worked 280 days,168 of which were in Spain and 112 of which were in the United States.How much of Janet's total compensation is treated as foreign source income for 2019?

Gwendolyn was physically present in the United States for 90 days in 2019,180 days in 2018,and 30 days in 2017.Under the substantial presence test formula,how many days is Gwendolyn deemed physically present in the United States in 2019?

Which statement best describes the U.S.framework for taxing multinational transactions?