Leah Pasternak Federal Taxation ACC317 Chapter 25: Taxation of International Transactions Homework Submission

19. Some tax issues that Sloop must considered could be that he branch profits tax may be levied on the additional U.S. source income and the additional U.S. source income would be subject to the U.S. Federal income tax. 27. The sourcing would be a foreign source because royalties are sourced based on where the property is used. 33. Reds dividend income in U.S. dollars would be $11,111. There is no exchange gain or loss. Red can claim an FTC for any foreign taxes withheld on the dividend. 40. U.S. taxable income: $600,000 34% = $204,000 The FTC limit is $37,400 ($110,000/$600,000 $204,000), however, the actual foreign taxes are less than the FTC limit so the entire $33,800 is allowed as a credit. Net U.S. tax liability $204,000 - $33,800 = $170,200 54. Even though Martinho is a nonresident alien he would pay no tax. Any capital gains not effectively connected with a US trade or business are exempt from the tax, as long as the NRA is not present in the US for 183 days or more during the taxable year. NRAs however are also not allowed to carryforward any capital gains.