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Exam 16: Multijurisdictional Taxation

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Question 71

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

A) Concerning the foreign tax credit, most U.S. persons benefit from earning low-tax foreign-source income.
B) Foreign persons generally benefit from avoiding U.S.-source income classification.
C) U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system.
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States.

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

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Question 72

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The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

A) True
B) False

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Question 73

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The model law relating to the assignment of income among the states for corporations is:

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 foreign tax credit related to the Starke dividend?

The following persons own Schlecht Corporation, a foreign corporation. ​ 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?

A U.S. taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Section 482 is used by the Treasury to:

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

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.