ForCo, a corporation that is incorporated in a foreign country that does not have a treaty with the United States, plans to conduct manufacturing, marketing, and sales operations in the United States. These U.S. operations produce $5 million of earnings & profits in Year 1. Assume further that the U.S. operations will have a net worth of $17 million at the beginning of Year 1 and $20 million at the end of Year 1. During Year 2, the U.S. branch does not produce any earnings & profits and its net worth is $20 million at the beginning of the year and $10 million at the end of the year. For branch profits tax purposes in Year 1, the dividend equivalent amount (“DEA”) for the U.S. branch is as follows: a. $1.5 million. b. $2.0 million c. $10 million. $20 million. d. $25 million. 2. For branch profits tax purposes in Year 2, the DEA for the U.S. branch is as follows: a. $2 million. b. $3 million. c. $10 million. d. $20 million. e. $25 million. 3. USAco has its only business operations in foreign country F. Ignoring Subpart F income and the GILTI inclusion, in Year 1 the foreign operations earn $3,000,000. USAco did not repatriate any of the earnings. Which one of the following statements is true? a. If the foreign operations are operated as a subsidiary, USAco does not report any income in Year 1. b. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of loss in Year 1. c. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of DEA for Branch Profit Tax purposes in Year 1. d. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of income in Year 1 because the operations do not constitute Subpart F income. e. If the foreign operations are operated as a branch, USAco has $3,000,000 of loss in Year 1. 4. USAco has its only business operations in foreign country F. In Year 2 (the year subsequent to Year 1 in the previous question), the foreign operations lose $3,000,000. USAco did not repatriate any current or accumulated earnings from the foreign operations. Ignoring Subpart F income and the GILTI inclusion, which one of the following statements is true? a. If the foreign operations are operated as a subsidiary, USAco reports a loss of $3,000,000 in Year 2. b. If the foreign operations are operated as a subsidiary, USAco has a $3,000,000 loss in Year 2 due to the §956 inclusion. c. If the foreign operations are operated as a subsidiary, USAco has a profit in Year 2 due to Subpart F. d. If the foreign operations are operated as a branch, USAco has a $3,000,000 loss in Year 2. e. If the foreign operations are operated as a branch, USAco does not report any income or loss in Year 2. 5. USAco, a domestic corporation, exports widgets on which it earns annual gross income of $1.5 million. USAco purchases the widgets from UNF Productions, a Florida corporation. On all export sales, title passes in the country of the foreign customer. Which one of the following statements is true? a. USAco has $1.5 million of foreign‑source income. b. Because USAco purchases the widgets that it exports, USAco has $0.75 million of foreign‑source income. c. USAco cannot take a foreign tax credit because USAco purchases the widgets in the United States. d. All of the above. e. None of the above.

ForCo, a corporation that is incorporated in a foreign country that does not have a treaty with the United States, plans to conduct manufacturing, marketing, and sales operations in the United States. These U.S. operations produce $5 million of earnings & profits in Year 1. Assume further that the U.S. operations will have a net worth of $17 million at the beginning of Year 1 and $20 million at the end of Year 1. During Year 2, the U.S. branch does not produce any earnings & profits and its net worth is $20 million at the beginning of the year and $10 million at the end of the year. For branch profits tax purposes in Year 1, the dividend equivalent amount (“DEA”) for the U.S. branch is as follows: a. $1.5 million. b. $2.0 million c. $10 million. $20 million. d. $25 million. 2. For branch profits tax purposes in Year 2, the DEA for the U.S. branch is as follows: a. $2 million. b. $3 million. c. $10 million. d. $20 million. e. $25 million. 3. USAco has its only business operations in foreign country F. Ignoring Subpart F income and the GILTI inclusion, in Year 1 the foreign operations earn $3,000,000. USAco did not repatriate any of the earnings. Which one of the following statements is true? a. If the foreign operations are operated as a subsidiary, USAco does not report any income in Year 1. b. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of loss in Year 1. c. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of DEA for Branch Profit Tax purposes in Year 1. d. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of income in Year 1 because the operations do not constitute Subpart F income. e. If the foreign operations are operated as a branch, USAco has $3,000,000 of loss in Year 1. 4. USAco has its only business operations in foreign country F. In Year 2 (the year subsequent to Year 1 in the previous question), the foreign operations lose $3,000,000. USAco did not repatriate any current or accumulated earnings from the foreign operations. Ignoring Subpart F income and the GILTI inclusion, which one of the following statements is true? a. If the foreign operations are operated as a subsidiary, USAco reports a loss of $3,000,000 in Year 2. b. If the foreign operations are operated as a subsidiary, USAco has a $3,000,000 loss in Year 2 due to the §956 inclusion. c. If the foreign operations are operated as a subsidiary, USAco has a profit in Year 2 due to Subpart F. d. If the foreign operations are operated as a branch, USAco has a $3,000,000 loss in Year 2. e. If the foreign operations are operated as a branch, USAco does not report any income or loss in Year 2. 5. USAco, a domestic corporation, exports widgets on which it earns annual gross income of $1.5 million. USAco purchases the widgets from UNF Productions, a Florida corporation. On all export sales, title passes in the country of the foreign customer. Which one of the following statements is true? a. USAco has $1.5 million of foreign‑source income. b. Because USAco purchases the widgets that it exports, USAco has $0.75 million of foreign‑source income. c. USAco cannot take a foreign tax credit because USAco purchases the widgets in the United States. d. All of the above. e. None of the above.

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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a. $1.5 million.

b. $2.0 million

c. $10 million.

$20 million.

d. $25 million.

2. For branch profits tax purposes in Year 2, the DEA for the U.S. branch is as follows:

a. $2 million.

b. $3 million.

c. $10 million.

d. $20 million.

e. $25 million.

3. USAco has its only business operations in foreign country F. Ignoring Subpart F income and the GILTI inclusion, in Year 1 the foreign operations earn $3,000,000. USAco did not repatriate any of the earnings. Which one of the following statements is true?

a. If the foreign operations are operated as a subsidiary, USAco does not report any income in Year 1.

b. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of loss in Year 1.

c. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of DEA for Branch Profit Tax purposes in Year 1.

d. If the foreign operations are operated as a subsidiary, USAco has $3,000,000 of income in Year 1 because the operations do not constitute Subpart F income.

e. If the foreign operations are operated as a branch, USAco has $3,000,000 of loss in Year 1.

4. USAco has its only business operations in foreign country F. In Year 2 (the year subsequent to Year 1 in the previous question), the foreign operations lose $3,000,000. USAco did not repatriate any current or accumulated earnings from the foreign operations. Ignoring Subpart F income and the GILTI inclusion, which one of the following statements is true?

a. If the foreign operations are operated as a subsidiary, USAco reports a loss of $3,000,000 in Year 2.

b. If the foreign operations are operated as a subsidiary, USAco has a $3,000,000 loss in Year 2 due to the §956 inclusion.

c. If the foreign operations are operated as a subsidiary, USAco has a profit in Year 2 due to Subpart F.

d. If the foreign operations are operated as a branch, USAco has a $3,000,000 loss in Year 2.

e. If the foreign operations are operated as a branch, USAco does not report any income or loss in Year 2.

5. USAco, a domestic corporation, exports widgets on which it earns annual gross income of $1.5 million. USAco purchases the widgets from UNF Productions, a Florida corporation. On all export sales, title passes in the country of the foreign customer. Which one of the following statements is true?

a. USAco has $1.5 million of foreign‑source income.

b. Because USAco purchases the widgets that it exports, USAco has $0.75 million of foreign‑source income.

c. USAco cannot take a foreign tax credit because USAco purchases the widgets in the United States.

d. All of the above.

e. None of the above.

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