inbound taxation questions True / False Questions Service revenue is sourced based on the location in...

inbound taxation questions

True / False Questions

Service revenue is sourced based on the location in which such services are rendered.
Income tax treaties can generally only result in an increase in the amount of U.S. tax due.
The purpose of the foreign tax credit is to reduce international double taxation.
Under present law, a trust is considered a US person only if a US court has primary supervision over the trust’s administration and US persons have the authority to control all substantial decisions of the trust.
Fixed or determinable, annual or periodical income from foreign sources is subject to Internal Revenue Code section’s 1441 and 1442.

Solutions

Expert Solution

1. True. Service revenue is source based on the location in which service are rendered

Explanation : The place, where the personal services are performed, generally determines the source of the personal service income, regardless of where the contract was made, or the place of payment or the residence of the payer.

2. False.

Explanation : The tax treaties align many tax laws between two countries regard withholding taxes and attempt to reduce double taxation. To simplify things and clarify which countries can tax what income and when, countries often enter into bilateral and sometimes multilateral tax treaties. This helps to reduce taxation and tax dues.

3. True.

Explanation : The foreign tax deduction allows American taxpayers to reduce their taxable income by a portion of the amount of income tax paid to foreign governments. The goal is to prevent citizens from being subject to double taxation for the same income.

4. True.

Explanation : Every trust is a foreign trust unless both of the following are true:

A U.S. court can exercise primary supervision over the administration of the trust; and One or more U.S. persons have the power to control all substantial decisions of the trust.

5. False

Explanation : Tax at a 30% (or lower treaty) rate applies to FDAP income or gains from U.S. sources, but only if they are not effectively connected with your U.S. trade or business. The 30% (or lower treaty) rate applies to the gross amount of U.S. source fixed or determinable, annual or periodical gains, profits, or income.

Colby Messinger answered 1 year ago

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