7090955-Solutions - CHAPTER 24 TAXATION OF INTERNATIONAL...

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CHAPTER 24 TAXATION OF INTERNATIONAL TRANSACTIONS SOLUTIONS TO PROBLEM MATERIALS S t a t u s : Q / P Question/ Present in Prior Problem Topic Edition Edition 1 Tax treaties New 2 Sourcing of income Unchanged 2 3 Sourcing of income Unchanged 3 4 Section 482 Unchanged 4 5 Foreign currency Modified 5 6 QBUs Unchanged 6 7 Section 367 Unchanged 7 8 Foreign Personal Holding Company Unchanged 8 9 CFC status Unchanged 9 10 CFC status Unchanged 10 11 Foreign tax credit (FTC) Unchanged 11 12 Section 78 gross up New 13 FIRPTA New 14 U.S. taxation of foreign corporation Unchanged 14 15 Income sourcing Unchanged 15 16 Income sourcing Unchanged 16 17 Income sourcing Unchanged 17 18 Interest expense allocation New 19 Foreign exchange gain or loss Modified 19 20 Foreign exchange gain or loss Unchanged 20 21 Section 367 Unchanged 21 22 Subpart F income New 23 Pro rata share of CFC income Unchanged 23 24 Foreign Personal Holding Company Unchanged 24 25 Foreign tax credit (FTC) New 26 Foreign tax credit (FTC) Unchanged 26 27
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24-2 2004 Comprehensive Volume/Solutions Manual S t a t u s : Q / P Question/ Present in Prior Problem Topic Edition Edition 29 Foreign tax credit (FTC) Unchanged 29 30 Measuring deemed-paid taxes in foreign currency New 31 Losses and FTC Unchanged 31 32 Analyze foreign investment opportunities Modified 32 33 Tax liability of foreign corporation Unchanged 33 34 Branch profits tax Unchanged
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Taxation of International Transactions 24-3 CHECK FIGURES 15.a. 15.b. 15.c. 15.d 15.e. 16. 18. 19. 20. 22. 23. $1,200 U.S.-source. $2,600 U.S.-source. $425 U.S.-source. $300 U.S.-source. $2,500 foreign-source. $50,000 U.S.-source income subject to U.S. taxation. $44,100 (tax book value) $0. $12,500 dividend; $0 exchange gain/loss. $390,000 Subpart F income. $99,288. 25. 26. 28. 29. 30. 31. 32. 33. 34. 35. $102,000. $68,300 U.S. tax liability Allowed in d. only. $181,818. $27,174. $3,400. Invest in the stock Exco (6% return vs. 4.62% return). $4,123,000. $24,000 BPT. Taxed on gain realized on sale of Jeff stock.
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24-4 2004 Comprehensive Volume/Solutions Manual DISCUSSION QUESTIONS 1. Investment income such as dividends and interest typically is subject to a withholding tax when earned by a nonresident of a country. Income tax treaties reduce the rate of withholding. p. 24-6 2. Generally, dividends paid by a foreign corporation are foreign-source income. Certain exceptions apply, however, when the dividends are paid by the U.S. branch of a foreign corporation where 25% or more of the foreign corporation’s gross income for the prior three years is effectively connected with a U.S. business. In this case, a portion of the dividends paid by the foreign corporation constitutes U.S.-source income. Example 6 3. TAX MEMORANDUM Date: December 7, 2003 To: U.S. Corporations From: Jean MacKay Subject:
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7090955-Solutions - CHAPTER 24 TAXATION OF INTERNATIONAL...

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