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Exam 16: Multijurisdictional Taxation

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Question 21

True/False

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Roughly 5% of all taxes paid by businesses in the United States are to state, local, and municipal jurisdictions.

A) True
B) False

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Question 22

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Purchase of inventory from a U.S.parent followed by which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia?

A) Sale to anyone outside Fredonia.
B) Sale to anyone inside Fredonia.
C) Sale to a related party outside Fredonia.
D) Sale to a nonrelated party outside Fredonia.

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

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Question 23

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The property factor includes land and buildings used for business purposes.

Income tax treaties provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Which of the following is not a foreign person?

The most commonly used state income tax apportionment formula is:

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.

Jaime received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000.Jaime's total U.S.tax liability is $840,000 (the 21% tax rate applies).Jaime's current-year FTC is $52,500.

Which of the following statements regarding income sourcing is correct?

Wellington, Inc., a U.S.corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year.Included in that amount is $20 million of Subpart F income.Wellington has been a CFC for the entire year and makes no distributions in the current year.Wellington must include in gross income:

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in a state such as entities with in-state headquarters.

USCo, a U.S.corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000, and its U.S.tax liability before the foreign tax credit is $315,000.What is USCo's allowed foreign tax credit?

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

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

U.S.income tax treaties:

Dark, Inc., a U.S.corporation, operates Dunkel, an unincorporated branch manufacturing operation in Germany. Dark reports $100,000 of taxable income from Dunkel on its U.S.tax return along with $400,000 of taxable income from its U.S.operations.Dark paid $30,000 in German income taxes related to the $100,000 of Dunkel income.Assuming a U.S.tax rate of 21%, what is Dark's U.S.tax liability after any allowable foreign tax credits?

A tax haven often is:

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:

The sourcing rules of Federal income taxation apply to deductions as well as to income items.