Chapter 9: Taxation of International Transactions36. A domestic corporation is one whose assets are primarily located in the U.S. For this purpose, the primarily located test (>50%) applies.
37. Quest is organized and operates in the U.K. Its U.S. effectively connected earnings for the taxable year are$900,000 and its net U.S. equity has increased by $40,000. Quest’s dividend equivalent amount for the tax year is $860,000.
38. Gains on the sale of U.S. real property held directly or indirectly through U.S. stock ownership by NRAs and foreign corporations are subject to tax at capital gains rates under FIRPTA.
39. In 2013, George renounces his U.S. citizenship and moves to Fredonia, where income tax rates are very low. George is a multimillionaire and says he “has had it” with high Federal income taxes on wealthy individuals like himself. In 2016, George’s U.S.source income is $1.5 million. That income escapes Federal income taxes.a. Trueb. FalseANSWER:FalseRATIONALE:Tax expatriates can be liable for U.S. income taxes on U.S.-source income for the ten years that follow their expatriation.
40. The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.