International Tax Issues

Question 1

What are the categories of income for foreign tax credit limitation purposes?

Answer 1

general category income, passive category income, foreign branch income, and global intangible low-taxed income

Question 2

When is the 100% DRD for foreign source dividends eligible?

Answer 2

when dividends are paid by a foreign corporation to a 10% or more U.S. corporate shareholder

Question 3

When would the base erosion and anti-abuse tax (BEAT) apply?

Answer 3

with average annual gross receipts of $500m or more for the 3 preceding tax years

Question 4

When is a foreign person treated as a U.S. resident?

Answer 4

when they have a green card or they meet the substantial presence test –> substantially present in the U.S. for 31 days in the current year and at least 183 days for a 3yr period applying a weighted average:

days in current year * 1
days in immediate preceding year * 1/3
days in next preceding year * 1/6

Question 5

The U.S. is a _____ tax system and the other type of tax system is _____

Answer 5

worldwide (citizens and residents are generally subject to tax on their worldwide income)

territorial (a nation only taxes its citizens and residents on income earned inside its borders)

Question 6

When a person invests abroad it is considered an _____ transaction and when a foreign person invests in the U.S. it is considered an _____ transaction

Answer 6

outbound and inbound (their income falls into one of two categories: business or nonbusiness)

Question 7

What are tax treaties?

Answer 7

they are bilateral income tax conventions entered into by the U.S. and a foreign country; they carry the same weight as domestic law and often modify otherwise applicable U.S. tax rules