939. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #21 BlueCo a domestic corporation incorporates its foreign branch in a § 351 exchange creating GreenCo a wholly owned foreign corporation. BlueCo transfers $200 in inventory (basis = $50) and $900 in land (basis = $950) to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the United States. What gain or loss if any is recognized as a result of this transaction? a. $0. b. ($50). c. $100. d. $150. 940. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #22 RedCo a domestic corporation incorporates its foreign branch in a § 351 exchange creating GreenCo a wholly owned foreign corporation. RedCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the United States. What gain or loss if any is recognized as a result of this transaction? a. $0. b. $50. c. $25. d. ($25). 941. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #23 Which of the following transactions by a U.S. corporation may result in taxation under § 367? a. Incorporation of U.S branch as a U.S. corporation when the branch earns foreign-source income. b. Incorporation of a U.S. branch as a U.S. corporation if the new U.S. corporation also has foreign shareholders. c. Incorporation of a U.S. branch as a U.S. corporation if the new U.S. corporation has no foreign shareholders. d. All the above. e. None of the above. 942. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #24 A tax haven often is: a. A country with high internal taxes. b. A country without income tax treaties. c. A country with no or low internal taxes. d. A country that prohibits “treaty shopping.” e. None of the above statements is true. 943. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #25 In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation? a. The stock is directly owned 12% by Jen 10% by Kathy 12% by Leslie 10% by David 8% by Ben and 48% by Mike. Jen Kathy Leslie David and Ben are all U.S. citizens. Mike is a foreign resident and citizen. b. The stock is directly owned 12% by Jen 10% by Kathy 12% by Leslie 10% by David 8% by Ben and 48% by Mike. Jen Kathy Leslie David and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen. c. The stock is directly owned 12% by Jen 10% by Kathy 12% by Leslie 10% by David 8% by Ben and 48% by Mike. Jen Kathy Leslie David and Ben are all U.S. citizens. Ben is Mike’s son. Mike is a foreign resident and citizen. d. The stock is directly owned 12% by Jen 10% by Kathy 12% by Leslie 10% by David 8% by Ben and 48% by Mike. Jen Kathy Leslie David Ben and Mike are all U.S. citizens. 944. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #26 The following persons own Schlecht Corporation a foreign corporation. Jim U.S. individual 35% Gina U.S. individual 15% Marina U.S. individual 8% Pedro U.S. individual 12% Chee non-U.S. individual 30% 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. Schlecht is not a CFC. b. Chee includes $90 000 in gross income. c. Marina is not a U.S. shareholder. d. Marina includes $24 000 in gross income. e. None of the above statements is correct. 945. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #27 Copp Inc. a domestic corporation owns 30% of a CFC that has $50 million of earnings and profits for the current year. Included in that amount is $20 million of Subpart F income. Copp has been a CFC for the entire year and makes no distributions in the current year. Copp must include in gross income (before any § 78 gross-up): a. $0. b. $50 million. c. $20 million. d. $6 million. 946. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #28 A controlled foreign corporation (CFC) realizes Subpart F income from: a. Purchase of inventory from unrelated party and sale outside the CFC country. b. Purchase of inventory from a related party and sale outside the CFC country. c. Services performed for the U.S. parent in a country in which the CFC was organized. d. Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized. e. None of the above transactions. 947. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #29 Which of the following income items does not represent Subpart F income if earned by a controlled foreign corporation? Purchase of inventory from the U.S. parent followed by: a. Sale to anyone inside the CFC country. b. Sale to anyone outside the CFC country. c. Sale to a related party outside the CFC country. d. Sale to a non-related party outside the CFC country. 948. CHAPTER 9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #30 Steve Inc. a U.S. shareholder owns 100% of a CFC from which Steve receives a $3 million cash distribution. The CFC’s E & P is composed of the following amounts. · $1 500 000 attributable to previously taxed increases in investment in U.S. property. · $500 000 attributable to previously taxed Subpart F income. · $4 800 000 attributable to other E & P. Steve recognizes a taxable dividend of: a. $3 million. b. $2 million. c. $1.5 million. d. $0.
