Emma, a U.S. resident, received the following income items for the current tax year. Determine the amount of U.S.-Source Income and Foreign-Source Income for each item. **Transaction Source Identification**Below is a table displaying various financial transactions. The goal is to determine for each transaction whether the income is from a U.S.-source or a foreign-source.| Transaction | U.S.-Source Income | Foreign-Source Income ||-----------------------------------------------------------------------------------------------------------------------|--------------------|-----------------------|| **a.** $600 interest from a savings account at a Florida bank. | $ | $ || **b.** $5,000 dividend from U.S. Flower Company, a U.S. corporation that operates solely in the eastern United States. | $ | $ || **c.** $7,000 dividend from Stern Corporation, a U.S. corporation that generated total gross income of $4,000,000 from the active conduct of a foreign trade or business for the immediately preceding three tax years. Stern's total gross income for the same period was $5,000,000. | $ | $ || **d.** $10,000 dividend from International Consolidated, Inc., a foreign corporation that reported gross income of $4,000,000 effectively connected with the conduct of a U.S. trade or business for the immediately preceding three tax years. International's total gross income for the same period was $12,000,000. | $ | $ || **e.** $5,000 interest on Warren Corporation bonds. Warren is a U.S. corporation that derived $6,000,000 of its gross income for the immediately preceding three tax years from operation of an active foreign business, and Warren's total gross income for this same period was $7,200,000. | $ | $ |**Instructions:**- **U.S.-Source Income:** If the income is generated from a U.S.-based source, record the amount in this column.- **Foreign-Source Income:** If the income is generated from a foreign source, record the amount in this column. This exercise helps to understand the allocation of income sources for tax purposes.

Answered: Image /qna-images/answer/3aedd7c1-33d3-4923-be00-508e742955e9.jpg

a. $600 interest from a savings account at a Florida bank. b. $5,000 dividend from U.S. Flower Company, a U.S. corporation that operates solely in the eastern United States. C. Transaction d. e. $7,000 dividend from Stern Corporation, a U.S. corporation that generated total gross income of $4,000,000 from the active conduct of a foreign trade or business for the immediately preceding three tax years. Stern's total gross income for the same period was $5,000,000. $10,000 dividend from International Consolidated, Inc. a foreign corporation that reported gross income of $4,000,000 effectively connected with the conduct of a U.S. trade or business for the immediately preceding three tax years. International's total gross income for the same period was $12,000,000. $5,000 interest on Warren Corporation bonds. Warren is a U.S. corporation that derived $6,000,000 of its gross income for the immediately preceding three tax years from operation of an active foreign business, and Warren's total gross income for this same period was $7,200,000. U.S.-Source Income Foreign-Source Income $ $ I

a. $600 interest from a savings account at a Florida bank. b. $5,000 dividend from U.S. Flower Company, a U.S. corporation that operates solely in the eastern United States. C. Transaction d. e. $7,000 dividend from Stern Corporation, a U.S. corporation that generated total gross income of $4,000,000 from the active conduct of a foreign trade or business for the immediately preceding three tax years. Stern's total gross income for the same period was $5,000,000. $10,000 dividend from International Consolidated, Inc. a foreign corporation that reported gross income of $4,000,000 effectively connected with the conduct of a U.S. trade or business for the immediately preceding three tax years. International's total gross income for the same period was $12,000,000. $5,000 interest on Warren Corporation bonds. Warren is a U.S. corporation that derived $6,000,000 of its gross income for the immediately preceding three tax years from operation of an active foreign business, and Warren's total gross income for this same period was $7,200,000. U.S.-Source Income Foreign-Source Income $ $ I

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Emma, a U.S. resident, received the following income items for the current tax year. Determine the amount of U.S.-Source Income and Foreign-Source Income for each item.

**Transaction Source Identification**

Below is a table displaying various financial transactions. The goal is to determine for each transaction whether the income is from a U.S.-source or a foreign-source.

| Transaction | U.S.-Source Income | Foreign-Source Income |
|-----------------------------------------------------------------------------------------------------------------------|--------------------|-----------------------|
| **a.** $600 interest from a savings account at a Florida bank. | $ | $ |
| **b.** $5,000 dividend from U.S. Flower Company, a U.S. corporation that operates solely in the eastern United States. | $ | $ |
| **c.** $7,000 dividend from Stern Corporation, a U.S. corporation that generated total gross income of $4,000,000 from the active conduct of a foreign trade or business for the immediately preceding three tax years. Stern's total gross income for the same period was $5,000,000. | $ | $ |
| **d.** $10,000 dividend from International Consolidated, Inc., a foreign corporation that reported gross income of $4,000,000 effectively connected with the conduct of a U.S. trade or business for the immediately preceding three tax years. International's total gross income for the same period was $12,000,000. | $ | $ |
| **e.** $5,000 interest on Warren Corporation bonds. Warren is a U.S. corporation that derived $6,000,000 of its gross income for the immediately preceding three tax years from operation of an active foreign business, and Warren's total gross income for this same period was $7,200,000. | $ | $ |

**Instructions:**

- **U.S.-Source Income:** If the income is generated from a U.S.-based source, record the amount in this column.
- **Foreign-Source Income:** If the income is generated from a foreign source, record the amount in this column.

This exercise helps to understand the allocation of income sources for tax purposes.

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