1) 2) 3) 4) 5) Chapter 5 Homework Problems FLA, a Florida corp. whose stock is publically traded on the NY Stock Exchange, and XCo, a country X corporation whose stock is publicly traded on an X stock exchange, each own 50% of the stock of FLXC, a country Y corporation whose income includes dividends and interest on portfolio securities. Neither FLA nor any of its affiliates owns stock of XCo or any corporation affiliated with XCo. What US tax consequences will result if 100 shares of XCo's stock, out of 1 million shares outstanding, are purchased by FLA? Zeus, a Swiss corporation, has 1,000 shares of a single class of stock outstanding. Jupiter, a widely held US. corporation, owns 460 shares. Answer the following questions: a. If the remaining 540 shares are owned equally by six unrelated U.S. individuals, are any of the stock owners of Zeus considered US shareholders? b. If the remaining 540 shares are owned equally by five unrelated U.S. individuals, are any of the stock owners considered US shareholders? c. If Partnership X (one of six shareholders each owning 9%) owns 90 shares and one of the partners of Partnership X also owns 90 shares of Zeus, is Zeus a CFC? d. If two of the six individuals owning shares in Zeus are husband and wife, is either considered a US shareholder? Is Zeus a CFC? NORco (a CFC located in Norway) acquires from USAco (the parent company) patents which NORco sublicenses for royalties to be received from independent licensees outside of Norway. Do the royalties received by NORco create Foreign Base Company Income? If so, what type? What additional information might be helpful to specifically determine if Subpart F income exists? Same facts as above, except NORco patents are acquired from inventions developed by NORco's own technicians. Would these royalties create Foreign Personal Holding Company Income? USAco owns 100% of SingCo, a Singapore corporation. USAco's main business is the engineering of private (non-commercial) aircraft engines. USAco then sells the aircraft engines to customers in multiple foreign countries. SingCo installs the engines in aircraft bodies, and provides maintenance services to customers in China in return for a contracted fee. Are the fees that SingCo receives for its work in China foreign base company income? Explain. 6) 7) USAco wholly owns CANco, a CFC in Canada. CANco has gross income of $45 million, which includes $40M in royalty income (not due to the active conduct of a trade or business) and $5M of oil-related income that CANco refined from Canadian sources for sale to customers in Canada. How much of CANco's income is Subpart F income? Explain. A, B, and C (unrelated individuals) own 8%, 46%, and 46%, respectively, of the single class of stock, IC, a Corporation organized under the laws of country X. IC's only asset is a hotel located in Country Y that 1C leases under a 30-year lease to a hotel operating company (organized under the laws of U and is unrelated to IC and its shareholders). The lease requires the operating company to keep the property in good repair, and to pay all repair and maintenance costs and real property taxes relating to the property. IC distributes no dividends to its shareholders. If A is a citizen of X who resides in the U.S., B is a citizen and resident of Y, and C is a US. citizen residing in Country Z, answer the following questions; Explain the rules governing Passive Foreign Investment Companies (PFIC). What type of income are the rents received by 1C? Is IC considered a PFIC? Is IC a CFC? Which, if any, of the shareholders are subject to the PFIC rules? FDP-PETP