International Taxation
Non-resident aliens can be subjected to US income tax on two types of income:
1. FDAP 2. ECI
Giselle is a citizen and resident of Brazil, a country with which the United States does not have an income tax treaty. Giselle earned $24,000 of compensation while working within the United States. She worked 60 days in the United States and 180 days in Brazil. How much of her compensation earned in the United States will be subject to U.S. tax? A. $24,000 B. $8,000 C. $6,000 D. $0
A. 24,000
Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark? A. 30 percent B. 15 percent C. 5 percent D. 0 percent
A. 30 percent
Which of the following persons should not be treated as a "U.S. shareholder" of a controlled foreign corporation (CFC) for subpart F purposes? A. A U.S. citizen owning 5 percent of the CFC B. A U.S. citizen owning 15 percent of the CFC C. A U.S. corporation owning 15 percent of the CFC D. All of the named persons are U.S. shareholders for subpart F purposes.
A. A U.S. citizen owning 5 percent of the CFC
Which of the following items of foreign source income is classified as passive category income for foreign tax credit purposes? A. Dividend received from a 5 percent owned foreign corporation, all of the income of which is derived from an active business. B. Dividend received from a 20 percent owned foreign corporation, all of the income of which is derived from an active business. C. Dividend received from a 100 percent owned foreign corporation, all of the income of which is derived from an active business. D. None of the dividends in the scenarios listed here are classified as passive category income.
A. Dividend received from a 5 percent owned foreign corporation, all of the income of which is derived from an active business.
Which statement best describes the U.S. framework for taxing non-U.S. persons on income earned from U.S. sources? A. Income that is characterized as effectively connected income is subject to net taxation while income that is characterized as fixed and determinable, annual or periodic income is subject to a withholding tax applied to gross income. B. Income that is characterized as effectively connected income is subject to a withholding tax applied to gross income while income that is characterized as fixed and determinable, annual or periodic income is subject to net taxation. C. All U.S. source income is subject to net taxation, regardless of whether it is characterized as effectively connected or as fixed and determinable, annual or periodic income. D. All U.S. source income is subject to a withholding tax applied to gross income, regardless of whether it is characterized as effectively connected or as fixed and determinable, annual or periodic income.
A. Income that is characterized as effectively connected income is subject to net taxation while income that is characterized as fixed and determinable, annual or periodic income is subject to a withholding tax applied to gross income.
Which of the following tax or non-tax benefits does not arise when a U.S. corporation forms a hybrid entity in Germany through which to earn business profits in Germany and elects to have the entity treated as a branch for U.S. tax purposes? A. Potential exemption from U.S. tax on income earned by the corporation B. Flow-through of losses from the German corporation to the tax return of the U.S. corporation C. Limited liability to the U.S. corporation for acts committed by the hybrid entity D. Free transferability of the stock of the hybrid entity by the U.S. corporation
A. Potential exemption from U.S. tax on income earned by the corporation
The theory of Subpart income is that it could be business income being earned by a corporation in a low taxed country, but A. The economic activity creating the income is somewhere else B. The low taxed country does not have a treaty with the USA so it is now subject to subpart F income C. The economic activity is also being generated in the same law taxed country leading to tax deferral D. None of these is correct
A. The economic activity creating the income is somewhere else
Which tax rule applies to an excess foreign tax credit (FTC) that arises in 2023? A. The excess FTC is first carried back to 2022 and any excess is carried forward for 10 years. B. The excess FTC is first carried back to 2021, then 2022, and any excess is carried forward for 20 years. C. The excess FTC is first carried back to 2020, then 2021, then 2022, and any excess is carried forward for five years. D. The excess FTC is carried forward 10 years, with no carryback allowed.
A. The excess FTC is first carried back to 2022 and any excess is carried forward for 10 years.
When determining who can use treaty benefits the taxpayer can only be a resident of one country, where resident is defined by the... A. Treaty B. Visa Status C. Residency Status D. Citizenship
A. Treaty
Regent SA, a corporation in an unnamed corporation with no US tax treaty, is engaged in a golf club business in its home country and the United States. The United States business is conducted through a US corporation. During each of the preceding five years, 35% of Regent's gross income was effectively connected with the United States business. If Regent pays a dividend of $1000 to its sole shareholder, a holding company in the foreign country, how much of this US is source income? A. $1000 B. $350 C. $650 D. $0
B. $350
Gwendolyn was physically present in the United States for 90 days in 2023, 180 days in 2022, and 30 days in 2021. Under the substantial presence test formula, how many days is Gwendolyn deemed physically present in the United States in 2023? A. 300 B. 155 C. 150 D. 90
B. 155
Gwendolyn was physically present in the United States for 96 days in 2023, 198 days in 2022, and 66 days in 2021. Under the substantial presence test formula, how many days is Gwendolyn deemed physically present in the United States in 2023? A. 360 B. 173 C. 132 D. 96
B. 173
Andrea was physically present in the United States for 150 days in 2023, 120 days in 2022, and 90 days in 2021. Under the substantial presence test formula, how many days is Andrea deemed physically present in the United States in 2023? A. 360 B. 205 C. 190 D. 150
B. 205
Precision SA, an islandian corporation, is engaged in a golf club business and the United States. The United States business is conducted through a foreign corporation. During each of the preceding five years, 35% of Precision's gross income was effectively connected with the United States. Precision pays a dividend of $1,000 to its sole shareholder, an Islandian holding company, how much of this is US source income? A. 1,000 B. 350 C. 650 D. 0
B. 350
IF a corporation is a per se corporation, then A. It can check the box to be recognized as a partnership for tax purposes B. It cannot use check the box C. To check the box they have to request permission from the national office of the IRS D. They default to being a pass-through entity
B. It cannot use check the box
Under a U.S. treaty, what must a non-resident corporation create in the United States before it is subject to U.S. taxation on its business profits? A.U.S. trade or business B. Permanent establishment C. The physical presence of at least one employee D. The physical presence of an asset such as a warehouse
B. Permanent establishment
For a foreign tax credit to be available for use by a taxpayer it has to be creditable. Which of the following would be considered creditable? A. a donation to a foreign government B. a withholding tax on foreign source dividends C. a backup withholding tax on US source dividends D. all of the above
B. a withholding tax on foreign source dividends
Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $200,000. Title to the inventory passed FOB: shipping point. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year? A. $200,000 B. $100,000 C. $0 D. The answer cannot be determined with the information provided.
C. $0
The foreign tax credit limit on the following is: Foreign dividend income = $12,000 Foreign tax paid through withholding =$1,200 Foreign Other Income = $80,000 Foreign income tax paid on this =$20,000 Total income = $170,000 Pre-credit US tax = $38,500 A. $21,200 B. $18,118 C. $20,836 D. $2,718
C. $20,836
If a US company has foreign source income fo $120,000 and US income of $240,000, pays foreign tax of $45,000 on its foreign sourced income and has a US tax rate of 21%, then the foreign tax credit is limited to A. $45,000 B. $25,500 C. $25,200 D. $15,000
C. $25,200
Saginaw Steel Corporation has a precredit U.S. tax of $105,000 on $500,000 of taxable income. Saginaw has $200,000 of foreign source taxable income and paid $60,000 of income taxes to the German government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Saginaw's foreign tax credit on its tax return will be: A. $105,000. B. $60,000. C. $42,000. D. $24,000.
C. $42,000
Bismarck Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in the current year. Bismarck has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign source taxable income characterized as passive category income. Bismarck paid $80,000 of foreign income taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income. What amount of foreign tax credit {FTC) can Bismarck use on its current-year U.S. tax return and what is the amount of the carryforward, if any? A. $90,000 FTC with $0 carryforward B. $52,000 FTC with $0 carryforward C. $52,000 FTC with $38,000 carryforward D. $16,500 FTC with $73,500 carryforward
C. $52,000 FTC with $38,000 carryforward
Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $215,000. Title to the inventory passed FOB: shipping point. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year? A. $215,000 B. $107,500 C. $0 D. The answer cannot be determined with the information provided.
C. 0
Austin Corporation, a U.S. corporation, received the following investment income during the current year: $50,000 of dividend income from ownership of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its 50 percent owned Irish venture, and $30,000 capital gain from sale of its stock in a Brazilian corporation. How much of Austin's income is treated as foreign source? A. $140,000 B. $110,000 C. $70,000 D. $60,000
C. 110,000
Ames Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income. Ames has $600,000 of foreign source taxable income and paid $120,000 of income taxes to the U.K. government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Ames's foreign tax credit on its tax return will be: A. $210,000. B. $126,000. C. $120,000. D. $72,000.
C. 120,000
A resident of Denmark buys stock of a US corporation traded on NYSE. He is definitely a nonresident alien to the US. When dividends are paid to the nonresident from the US corp, withholding taxes cannot exceed A. 0% B. 5% C. 15% D. 30%
C. 15% Denmark Treaty statutes.
Saginaw Steel Corporation has a precredit U.S. tax of $110,000 on $505,000 of taxable income. Saginaw has $205,000 of foreign source taxable income and paid $65,000 of income taxes to the German government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Saginaw's foreign tax credit on its tax return will be: A. $110,000. B. $65,000. C. $44,653. D. $26,000.
C. 44653
For purposes of reducing double taxation on cross border transactions, this can be accomplished by A. Giving for the tax paid to the non-resident country B. Creating an exemption in one of the countries of the transaction from income recognition on the income causing the double tax C. Both A and B D. None of the above
C. Both A and B
The check the box regulations can be used with: A. US Domestic entities B. Foreign Entities C. Both US and Foreign entities D. Only with corporations
C. Both US and Foreign
What the typical treaty Article that's main purpose is attempting to limit treaty shopping? A. Savings Clause B. Permanent Establishment C. Limitation of Benefits D. Income Covered
C. Limitation of Benefits
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.
C. Lower statutory tax rates imposed on effectively connected income (ECI) earned by a resident of one country in the other country.
Which of the following transactions engaged in by a Swiss controlled foreign corporation creates foreign base company sales income? A. Purchase of inventory from an unrelated person in Germany and sale to a related person in Poland. B. Purchase of inventory from a related person in Germany and sale to an unrelated person in Switzerland. C. Purchase of inventory from a related person in Germany and sale to a related person in Poland. D. Purchase of inventory from an unrelated person in Germany and sale to an unrelated person in Poland.
C. Purchase of inventory from a related person in Germany and sale to a related person in Poland.
Which of the following statements best describes the operation of subpart F as it applies to income earned by a foreign corporation? A. Subpart F causes all income of a controlled foreign corporation to be treated as a deemed dividend to all U.S. persons owning stock in the corporation on the last day of the corporation's tax year. B. Subpart F causes certain income of a controlled foreign corporation to be treated as a deemed dividend to all U.S. persons owning stock in the corporation on the last day of the corporation's tax year. C. Subpart F causes certain income of a controlled foreign corporation to be treated as a deemed dividend to only those U.S. shareholders owning stock in the corporation on the last day of the corporation's tax year. D. Subpart F causes all income of a controlled foreign corporation to be treated as a deemed dividend to only those U.S. shareholders owning stock in the corporation on the last day of the corporation's tax year.
C. Subpart F causes certain income of a controlled foreign corporation to be treated as a deemed dividend to only those U.S. shareholders owning stock in the corporation on the last day of the corporation's tax year.
Which statement best describes the U.S. framework for taxing multinational transactions? A. The U.S. government applies source-based taxation to income earned by U.S. and non-U.S. persons. B. The U.S. government applies residence-based taxation to income earned by U.S. and non-U.S. persons. C. The U.S. government applies residence-based taxation to income earned by U.S. persons and source-based taxation to income earned by non-U.S. persons. D. The U.S. government applies source-based taxation to income earned by U.S. persons and residence-based taxation to income earned by non-U.S. persons.
C. The U.S. government applies residence-based taxation to income earned by U.S. persons and source-based taxation to income earned by non-U.S. persons.
Which statement best describes the US framework for taxing multinational taxations? A. The US government applies source-based taxation to income earned by US and non-US persons. B. The US government applies residence-based taxation to income earned by US and non-US persons. C. The US government applies worldwide sourced income taxation to income earned by US persons and source-based taxation to income earned by non-Us persons. D. The US government applies source-based taxation to income earned by US persons and residence-based taxation to income earned by non-US persons.
C. The US government applies worldwide sourced income taxation to income earned by US persons and source-based taxation to income earned by non-Us persons.
Which of the following statements best describes the substantial presence test as it applies to determining if a non-U.S. citizen is a resident alien for U.S. tax purposes? A. To be treated as a resident alien, an individual must be physically present in the United States for 183 days in the current year. B. To be treated as a resident alien, an individual must be physically present in the United States for 183 days in the current year and each of the prior two years. C. To be treated as a resident alien, an individual must be physically present in the United States for the equivalent of 183 days, calculated using a formula that includes the current year and the prior two years. D. To be treated as a resident alien, an individual must be physically present in the United States for the equivalent of 183 days, calculated using a formula that includes the current year and the prior year.
C. To be treated as a resident alien, an individual must be physically present in the United States for the equivalent of 183 days, calculated using a formula that includes the current year and the prior two years.
Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes? A. Income tax paid to the government of Portugal B. Income tax paid to the city of Amsterdam C. Value-added tax paid to the government of France D. All of these taxes are creditable.
C. Value-added tax paid to the government of France
Which of the following foreign taxes is not creditable for U.S. tax purposes? A. Direct taxes paid by a U.S. corporation on income earned in a foreign branch. B. Income taxes paid to a foreign taxing authority on a dividend received by a U.S. corporation from its 100 percent owned foreign subsidiary. C. Withholding taxes imposed on a dividend received by a U.S. corporation from its 100 percent owned foreign subsidiary. D. All of these taxes are creditable.
C. Withholding taxes imposed on a dividend received by a U.S. corporation from its 100 percent owned foreign subsidiary.
Wifi, inc., a US corporation operating worldwide including in the US, has office expenses for the tax year of $200,000, no portion of which is directly allocable to the property under regulations. These expenses relate to the activity of running the US retail business. The income from all retail stores worldwide is composed of 40% US and 60% foreign. How much of the office expense is apportioned to US source income? A. $0 B. $100,000 C. $80,000 D. $200,000
D. $200,000
To be eligible for the "closer connection" exception to the physical presence test, an individual must be in the United States for less than how many days? A. 31 B. 61 C. 181 D. 183
D. 183
Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,000 of dividend income from ownership of stock in a U.S. corporation, $10,000 interest from a certificate of deposit in a U.S. bank, $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,000 capital gain from sale of a stock in a U.S. corporation. How much of Russell's income will be subject to U.S. taxation? A. $20,000 B. $15,000 C. $10,000 D. $8,000
D. 8,000
Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,020 of dividend income from ownership of stock in a U.S. corporation, $10,100 interest from a certificate of deposit in a U.S. bank, $3,050 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,025 capital gain from sale of a stock in a U.S. corporation. How much of Russell's income will be subject to U.S. taxation? A. $20,195 B. $15,120 C. $10,100 D. $8,070
D. 8,070
IF the foreign income tax paid on foreign income is subject to a limitation such that not all of the foreign tax paid is eligible fo rthe credit then some alternative choices are: A. Take the election to deduct the tax paid B. Carryover the unused portion for the next ten years until used up C. The only option is to deduct D. A & B are correct
D. A & B are correct
Which statement best describes the U.S. framework for determining if an individual who is not a U.S. citizen will be treated as a resident alien for U.S. tax purposes? A. A person must have a green card and meet a substantial presence test to be treated as a resident alien for U.S. tax purposes. B. A person must have a green card to be treated as a resident alien for U.S. tax purposes. C. A person must meet a substantial presence test to be treated as a resident alien for U.S. tax purposes. D. A person with a green card will always be treated as a resident alien for U.S. tax purposes, while a person without a green card may be treated as a resident alien if she meets a substantial presence test.
D. A person with a green card will always be treated as a resident alien for U.S. tax purposes, while a person without a green card may be treated as a resident alien if she meets a substantial presence test.
A PFIC is taxed on one of three ways: A. Currently, based on a computation of the earnings accruing to owner. Not an option if the PFIC does not make this available this information. B. Currently, based on an increase in fair value, or the mark to market method C. A shareholder of the PFIC is by default subject to Sec. 1291 excess distribution regime in which US taxpayers must allocate excess distributions and gains realized upon the sale of their PFIC shares pro rata to their entire holding period D. All of the above
D. All of the above
FIF's and CFC's are foreign corporation that are often taxed even if a dividend is not formally paid because the "tainted" (Subpart F) income earned is attributed to the US owner through what concept? A. Declared Dividend B. Preferred Dividend C. Liquidating Dividend D. Deemed Dividend
D. Deemed Dividend
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? A. Potential exemption of U.S. tax on income earned by the corporation B. Treaty benefits on cross-border payments between the Irish corporation and the U.S. corporation C. Use of transfer pricing to shift income between the United States and Ireland D. Flow-through of losses from the Irish corporation to the tax return of the U.S. corporation
D. Flow-through of losses from the Irish corporation to the tax return of the U.S. corporation
Which of the following incomes earned by a controlled foreign corporation incorporated in Spain is not foreign personal holding company income? A. Interest income received from a loan to an unrelated party. B. Dividend income from a 5 percent investment in an unrelated corporation. C. Rent received from a passive investment in an apartment complex. D. Gross profit from the manufacture and sale of inventory to an unrelated party.
D. Gross profit from the manufacture and sale of inventory to an unrelated party.
Provo Corporation, a U.S. corporation, received a dividend of $350,000 from its 100 percent owned German subsidiary. A withholding tax of $35,000 was imposed on the dividend. The dividend qualifies for the 100 percent dividends received deduction. What are the U.S. tax consequences to Provo on receipt of the dividend, assuming the foreign tax credit limitation is not binding and the company breaks even on its U.S. operations? A. Taxable income of $350,000, net U.S. tax liability of $0, and $14,000 FTC carryforward B. Taxable income of $350,000, net U.S. tax liability of $20,000, and $0 FTC carryforward C. Taxable income of $0 and $35,000 FTC carryforward D. Taxable income of $0 and $0 FTC carryforward
D. Taxable income of $0 and $0 FTC carryforward
Which of the following exceptions could cause subpart F income to be excluded from the deemed dividend regime? A. The full inclusion rule only B. The de minimis rule only C. The high-tax rule only D. The de minimis rule and the high-tax rule could cause subpart F income to be excluded from the deemed dividend regime.
D. The de minimis rule and the high-tax rule could cause subpart F income to be excluded from the deemed dividend regime.
Windmill Corporation, a Dutch corporation, is owned by the following unrelated persons: 50 percent by a U.S. corporation, 5 percent by a U.S. individual, and 45 percent by a Swiss corporation. During the year, Windmill earned $2,000,000 of subpart F income. Which of the following statements is true about the application of subpart F to the income earned by Windmill? A. Windmill is a CFC and the U.S. corporation and U.S. individual will have a deemed dividend of $1,000,000 and $100,000, respectively. B. Windmill is a CFC and only the U.S. corporation will have a deemed dividend of $1,000,000. C. Windmill is a CFC and the U.S. corporation, U.S. individual, and Swiss corporation will have a deemed dividend of $1,500,000, $100,000, and $900,000, respectively. D. Windmill is not a CFC and none of the shareholders will have a deemed dividend under subpart F.
D. Windmill is not a CFC and none of the shareholders will have a deemed dividend under subpart F.
What is ECI income?
ECI income consists of income that is effectively connected to a US trade or business.
What income is subject to only a flat tax that is taxed on the gross amount of income without any deductions. This is considered a withholding tax?
FDAP Income
What is FDAP income?
FDAP income consists of passive investment income that is not effectively connected to a trade or business. (i.e. dividends, rents, royalties)
A Japanese corporation owned by 11 U.S. individuals cannot be treated as a controlled foreign corporation for U.S. tax purposes.
False
A corporation chartered in the USA is not a resident taxpayer of the US if its headquarters is located in the UK
False
Alex, a U.S. citizen, became a resident of Belgium in 2023. Alex will no longer be subject to U.S. taxation on income he earns in Belgium if such income is exempted from tax under the U.S.-Belgium treaty.
False
Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary. The dividend is eligible for the 100 percent dividends received deduction. Any income taxes paid to a Spanish taxing authority will be creditable.
False
All income earned by a Swiss corporation owned by a U.S. corporation is deferred from U.S. taxation until such income is remitted back to the United States.
False
All passive income earned by a CFC will be treated as foreign personal holding company income under subpart F for U.S. tax purposes.
False
All taxes paid to a foreign government by a U.S. individual are creditable on the individual's U.S. tax return.
False
Amy is a U.S. citizen. During the year she earned income from an investment in a French company. Amy will be subject to U.S. taxation on her income under the principle of source-based taxation.
False
Amy is not a US citizen or green card holder during the current 2022 year she was present in the USA for 30 days. In 2021 and 2020 she was present for 365 days in each year. For 2022 she is a US resident for tax purposes.
False
Deductible interest expense incurred by a U.S. corporation will always be treated as a U.S. source deduction.
False
FBAR reporting applies to US citizens, but not US residents who are residents because they pass the Substantial Presence Test.
False
If you own shares in a PFIC, you have to pay tax on the income earned in that year, paying it currently, in the year earned.
False
In tax law context, the term US person refers only to an individual not a business entity.
False
Marcel, a U.S. citizen, receives interest income from bonds issued by a Dutch corporation. The interest income will be considered U.S. source income for U.S. tax purposes.
False
Since the Value added tax is paid by each member of the supply chain for a product or service it means that the full burden of the VAT does not fall on the consumer.
False
Subpart F income earned by a CFC will always be treated as a deemed dividend to the CFC's U.S. shareholders in the year the subpart F income is earned.
False
Tax deferral is achievable by having profits earned in a foreign corporation, investing solely in passive investments, where one owns that corporation 100%, and deferring repatriating the profits by not paying a dividend from the foreign corporation.
False
The BEAT is a tax on intangible asset profits earned by US companies in other countries.
False
The foreign tax credit, if carried over, does not have to follow the limitation of baskets; meaning you can combine all the credits together to compute the limitation and the limits per basket do not apply when you carryover unused credits.
False
The goal of GITLI is to encourage US companies to keep their profits from tangible assets taxable here in America as opposed to overseas.
False
The gross profit from a sale of inventory manufactured in the United States and sold by a U.S. retailer to a customer in Spain will always be treated as 100 percent U.S. source income.
False
The tax rates in different countries vary widely, but this has no bearing on planning for cross-border transactions.
False
The tax treaty definition of a Permanent Establishment makes it more difficult to determine if a foreign person with a trade or business is considered to be a US trade or business.
False
U.S. corporations are eligible for a foreign tax credit for withholding taxes imposed on dividends received from 100 percent owned foreign corporations, even if the dividend qualifies for the 100 percent dividends received deduction.
False
US corporation (c-corp) receives a dividend from a foreign corporation it has 25% ownership of and then pays a dividend to its US shareholder. The shareholder does not pay US tax on the dividend since the corporation already paid a tax on the dividend.
False
Under the terms of international tax cooperation a country cannot impose a withholding tax on income earned by foreigners.
False
In order to be a CFC under US tax law, the foreign corporation must be owned by at least 50% by US shareholders, as defined as US persons owning greater than 10% of the foreign company's stock.
False Must be MORE than 50%.
FBAR reporting for those to whom it applies, is required when the total of one foreign financial account goes over $10,000 during the year.
False. The aggregate of all accounts go over $10,000.
An example of FDAP income that is sourced as US sourced but not taxable to non-resident aliens (NRAs)
Portfolio Interest Income
If a non-resident lawyer has taxable FDAP income but the tax hasn't been paid, who is responsible for paying that tax?
The payor of the FDAP income is required to withhold or "withholding agent".
How is the tax for FDAP paid?
There is a 30% flat tax that is collected by withholding at the source of the income.
"Outbound taxation" deals with the U.S. tax rules that apply to U.S. persons doing business outside the United States
True
A US citizen is the sole shareholder of a LTD in Israel. They can check the box to have it taxed as a pass-through entity rather than as a corporation.
True
A US citizen recieving a dividend from a foreign corporation pays US tax on this and it is foreign source income.
True
A hybrid entity established in Ireland is treated as a flow-through entity for U.S. tax purposes and a corporation for Irish tax purposes.
True
A non-U.S. citizen with a green card will always be treated as a resident alien for U.S. tax purposes regardless of the number of days she spends in the United States during the current year.
True
Arguably, GITLI encourages US companies to increase their invested tangible assets so as to lower the amount of GITLI income subject to the GITLI tax.
True
At its core, Branch profits tax attempts to get a foreign branch of a foreign corporation doing business in the US to be taxed similar to if it was doing here as a US corporation for its US operations.
True
Cecilia, a Brazilian citizen and resident, spent 120 days working in the United States in the current year and earned $50,000. Because she spent more than 90 days in the United States, Cecilia's income will be treated as U.S. source and subject to U.S. taxation. The United States does not have an income tax treaty with Brazil.
True
Countries try to devise their tax laws to avoid double taxation and double non-taxation when it applies to cross border transactions.
True
FATCA came about so the USA could find out where their citizens have foreign assets earning income that is subject to worldwide taxation here in the US.
True
Foreign Investment Funds (FIF) are foreign entities earning passive income and the US tax law requires current taxation of their earnings.
True
Foreign Investment Funds (FIFs) come in two varieties: The so called FIF or "incorporated pocketbook", owned by 5 or fewer individuals and the Passive Foreign Investment Company (PFIC).
True
GILTI is another form of Subpart F income
True
GITLI's concept of excess profits from tangible assets is that a normal profit for its invested tangible assets is 10% on those assets.
True
If a US citizen owns a foreign entity 100% and is looking to defer the US tax on the income earned there they would want to make sure that it is: 1. Considered to be a foreign corporation for US tax purposes and 2. Does not have Subpart F income
True
Non-resident aliens can be subject to US income tax if the income is US sourced
True
One of the tax advantages to an individual using a corporation through which to earn income in Germany is deferral of U.S. taxation on active business income earned by the corporation until such income is remitted back to the United States.
True
Outbound taxation deals with the US tax rules that apply to US persons doing business outside the United States.
True
Philippe is a French citizen. During 2023 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2023, he will not under any circumstances be treated as a resident alien for U.S. tax purposes.
True
Tax deferral is achievable by having profits earned in a foreign corporation, doing a trade or business, where one owns that corporation 100%, and deferring repatriating the profits by not paying a dividend from the foreign corporation.
True
The Canadian government imposes a withholding tax of 15 percent on a dividend paid by a Canadian corporation to a U.S. individual. The withholding tax will be creditable on the individual's U.S. tax return as an "in lieu of" tax.
True
The Foreign Tax Credit regime is the primary mechanism used by the US government to mitigate or eliminate the potential double taxation of income earned by US individuals outside the United States.
True
The US approach to taxation of non-US persons is source-based.
True
The US foreign tax credit is not a concern for non-US foreign persons dealing with tax issues inbound to the US.
True
The US has tax treaties with various other countries around the world. Each treaty involves the US and only one other country. Few US treaties involve more than one country at a time.
True
The US will tax non-US persons on their US sourced passive type income (FDAP) and their US-based sourced income from a US trade or business (ECI).
True
The United States generally taxes U.S. source fixed and determinable, annual or periodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income
True
The complex tax formula for FDII, Foreign Derived Intangible Income is to discourage US companies from, amongst other things, corporate inversions.
True
The foreign tax credit regime is the primary mechanism used by the U.S. government to mitigate or eliminate the potential double taxation of income earned by U.S. individuals outside the United States.
True
The tax on GITLI for corporate shareholders is subject to a 50% reduction, currently, making effective tax rate 10.5%, which is the 1/2 the corporate rate of 21%.
True
US citizen receiving a dividend from a foreign corporation that they own 100% pays US tax on this income and it is foreign source income.
True
US corporation (c-corp) receives a dividend from a foreign corporation that it has 25% ownership of, does not pay any US tax on this.
True
US source interest income that is properly constructed as portfolio interest would normally not be taxed by the US as long as the lender does not own 10% of more of the payor company and is not in the business of being a lending business.
True
Under most U.S. treaties, a resident of the other country must have a permanent establishment in the United States before being subject to U.S. taxation on business profits earned within the United States.
True
