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 income item.

If an amount is zero, enter"0". If required, round your answer to the nearest dollar.

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 had 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 had 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. $ $

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Answer 1

	Transaction	U.S.-Source Income	Foreign-Source Income
a.	$600 interest from a savings account at a Florida bank.	$600.00	$0.00	residence of the payer of the Interest
b.	$5,000 dividend from U.S. Flower Company, a U.S. corporation that operates solely in the eastern United States.	$5,000.00	$0.00	residence of the payer of the dividend
c.	$7,000 dividend from Stern Corporation, a U.S. corporation that had 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.	$7,000.00	$0.00	Dividends received from domestic corps. are sourced inside the U.S.
d.	$10,000 dividend from International Consolidated, Inc., a foreign corporation that had 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.	$3,333.33	$6,666.67	Calculated Below
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.	$0.00	$5,000.00	Interest received from a U.S. corp. that earned ? 80% of its active business income from foreign sources over the prior 3 year period is treated as foreign-source income

If ? 25% of offshore corp.’s income is effectively connected with a U.S. trade or business for the 3 tax years immediately preceding dividend payment, that percentage of the dividend is treated as U.S.-source income
In this case
Gross Income	Company	effectively connected with a U.S. trade or business for past three years	% of U.S. Source of income	U.S Source Income	Foreign source Income
$12 million	International	$4 Million	33.33%	$3,333.33	$6,666.67