Question

U.S. C corporation exports products to Turks and Caicos. To make the product, U.S. C corporation has depreciable assets having a quarterly adjusted basis of $10 million and earns $5 million of tested income. What is U.S. Parent's foreign derived intangible income?

Question 1 options:

	1) $4 million.
	2) $3 million.
	3) $2 million.
	4) $1 million.

Don Dealer ("Dealer") is a citizen of the United Kingdom. He decides to come to the United States to open a car dealership in Detroit. Dealer does not obtain a Green Card, but he procures a visa to work in the United States. He is physically present in the United States during the following periods:

20X1 (May 1 through August 30)
20X2 (August 1 through December 30)

Which of the following best describes Dealer in 20X2?

Question 5 options:

	1) Dealer is taxed on only his U.S.-source income.
	2) Dealer is a nonresident alien due to the closer connection exception.
	3) Dealer is a U.S. citizen.
	4) Dealer is a resident alien and taxed on his worldwide income.

One U.S. person owns 47% of FORco, a second U.S. person owns 5% of FORco, and foreign persons own the remaining 48% of FORco. Which one of the following statements is true?

Question 6 options:

	1) FORco is not a CFC.
	2) FORco is a PFIC.
	3) FORco is a CFC.
	4) None of the above.

USAco exports videos containing Brewer baseball highlights from the Lopes-Royster era (each video lasts only 30 seconds) on which USAco earns annual gross income of $1.5 million. USAco purchases the videos from Misey Productions, a Wisconsin corporation. On all export sales, title passes in the country of the foreign customer. Which one of the following statements is true?

Question 7 options:

	1) USAco has $1.5 million of foreign-source income.
	2) Because USAco purchases the videos that it exports, USAco has $.75 million of foreign-source income.
	3) USAco cannot take a foreign tax credit because USAco purchases the videos in the United States.
	4) All of the above USCo purchases widgets in the United States and sells them abroad with title on resale passing in the foreign country whose operations sold the widget. In addition to earning $100,000 of taxable income from U.S. sales, USCo earns $100,000 of taxable income from Canadian sales by its Canadian branch that is subject to tax in Canada at a 25% rate. USCo also has a Hong Kong branch that earns $100,000 of taxable income from sales that is subject to Hong Kong tax at a 15% rate. What are the foreign income taxes? Question 9 options: 1) $42,000. 2) $15,000. 3) $40,000. 4) $25,000. USCo, a C corporation, owns 100% of FORco, a foreign corporation. FORco earns $10 million of foreign-source income, pays $1 million of foreign income taxes, and distributes its $9 million in profits to USCo as a dividend. What is the amount of income tax in the United States? Question 10 options: 1) $0. 2) $1.89 million. 3) $890,000. 4) $2.1 million.

Answer 1

Solution 1: Option 1 ($4 million)

Solution 5: Option 4 (Dealer is a resident alien and taxed on his worldwide income)

Solution 6: Option 1 (FORco is not a CFC)

Solution 7: Option 3 (USAco cannot take a foreign tax credit because USAco purchases the videos in the United States)

Solution 9: Option 3 ($40,000)

Solution 10: Option 1 ($0)