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.