949. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #31 OutCo a controlled foreign corporation earns $600 000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the unrelated companies are located in OutCo’s country of incorporation. OutCo’s Subpart F income for the year is: a. $0. b. $0 only if OutCo is engaged in a trade or business in its home country. c. $600 000 only if OutCo is engaged in a trade or business in its home country. d. $600 000. 950. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #32 OutCo a controlled foreign corporation owned 100% by USCo earned $900 000 in Subpart F income for the current year. OutCo’s current year E & P is $250 000 and its accumulated E & P is $18 million. What is the current year Subpart F deemed dividend to USCo? a. $250 000. b. $650 000. c. $900 000. d. $18 million. 951. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #33 Peanut Inc. a domestic corporation receives $500 000 of foreign-source interest income on which foreign taxes of $5 000 are withheld. Its worldwide taxable income is $900 000 and U.S. tax liability before FTC is $315 000. What is Peanut’s foreign tax credit? a. $500 000. b. $315 000. c. $175 000. d. $5 000. 952. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #34 Abbott Inc. a domestic corporation reports worldwide taxable income of $8 million including a $900 000 dividend from ForCo a wholly-owned foreign corporation. ForCo’s post-1986 undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings. What is Abbott’s deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)? a. $0. b. $600 000. c. $900 000. d. $18 million. 953. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #35 Ridge Inc. a domestic corporation reports worldwide taxable income of $800 000 including a $300 000 dividend from Emma Inc. a foreign corporation. Ridge’s U.S. tax liability before FTC is $280 000. Ridge owns 20% of Emma. Emma’s post-1986 E & P after taxes is $8 million and it has paid foreign taxes of $4 million attributable to that E & P. If Ridge elects the FTC its U.S. gross income with regard to the dividend from Emma is: a. $450 000. b. $300 000. c. $90 000. d. $60 000. 954. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #36 Amber Inc. a domestic corporation receives a $150 000 cash dividend from Starke Ltd. Amber owns 15% of Starke. Starke’s post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P. What is Amber’s foreign tax credit related to the Starke dividend? a. $200 000. b. $150 000. c. $100 000. d. $75 000. 955. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #37 Amber Inc. a domestic corporation receives a $150 000 cash dividend from Starke Ltd. Amber owns 15% of Starke. Starke’s post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P. What is Amber’s gross income related to the Starke dividend? a. $225 000. b. $150 000. c. $33 750. d. $22 500. 956. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #38 Kilps a U.S. corporation receives a $200 000 dividend from a 20% owned foreign corporation. The deemed-paid taxes attributable to this dividend are $40 000 and foreign taxes withheld on remittance of the dividend are $30 000. Kilps’s U.S. tax liability before the FTC is $350 000 the gross dividend income is $240 000 and Kilps’s worldwide taxable income is $1 million. Kilps’s foreign tax credit for the taxable year is: a. $84 000. b. $70 000. c. $40 000. d. $30 000. 957. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #39 Which of the following is not a specific separate income “basket” for purposes of the foreign tax credit limitation calculation? a. Business income. b. Passive income. c. Intangibles income. d. None of the above are separate FTC limitation baskets. e. All of the above are separate FTC limitation baskets. 958. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #40 USCo a domestic corporation receives $100 000 of foreign-source income in the general income basket and $40 000 of foreign-source income in the passive income basket. Worldwide taxable income is $1 200 000 and the U.S. tax liability before FTC is $420 000. Foreign taxes attributable to the general income basket are $60 000 and to the passive income are $4 000. What is USCo’s foreign tax credit for the tax year? a. $39 000. b. $64 000. c. $60 000. d. $4 000. e. Some other amount.
