Expert Answer :CHAPTER 1UNDERSTANDING AND WORKING WITH THE FED

Solved by verified expert :1021. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #1During 2012, Martina, an NRA, receives interest income of $50,000 from Collins, Inc., an unrelated U.S. corporation. Considering the following facts related to Collins’ operations, what is the source of the interest income received by Martina? U.S.-source Active foreign Total grossYear income business income income2009 $200,000 $ 500,000 $ 700,0002010 50,000 950,000 1,000,0002011 100,000 900,000 1,000,000Totals $350,000 $2,350,000 $2,700,000 2012 $150,000 $ 950,000 $1,100,000 1022. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #2Goolsbee, Inc., a domestic corporation, generates U.S.-source and foreign-source gross income. Goolsbee’s assets (tax book value) are as follows.Generating U.S.-source income $15,000,000Generating foreign-source income 25,000,000Total $40,000,000 Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.1023. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #3Arendt, Inc., a domestic corporation, purchases a piece of equipment for use in its manufacture of custom pianos. The equipment is acquired in Ireland at a cost of 200,000 euros when 1 euro: $1.25. Payment is due in 90 days. Arendt acquires 200,000 euros and pays for the machine when 1 euro: $1.15. What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?1024. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #4KeenCo, a domestic corporation, is the sole shareholder of LovettCo, a controlled foreign corporation. LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo and $200,000 E & P attributable to income taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $125,000 dividend distribution to KeenCo. Ignoring any deemed paid credit implications, what is the U.S. gross income to KeenCo resulting from this dividend?1025. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #5Given the following information, determine if FanCo, a foreign corporation, is a CFC.Shareholders of Voting foreign corporation power ClassificationMurray 25% U.S. personNancy 24% U.S. personOtto 45% Foreign personPatricia 6% U.S. person Patricia is Murray’s daughter.1026. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #6Present, Inc., a domestic corporation, owns 60% of the stock of Past, Inc., a foreign corporation. For the current year, Present receives a dividend of $80,000 from Past. Past’s pools of post-’86 E & P (after taxes) and foreign taxes are $4,000,000 and $500,000, respectively. What is Present’s total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?1027. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question PR #7Britta, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes as follows. Income TaxesPassive category $200,000 $ 10,000General limitation category 800,000 350,000 Britta’s worldwide taxable income is $1,600,000 and U.S. taxes before FTC are $560,000 (assume a 35% tax rate). What is Britta’s U.S. tax liability after the FTC?