Emma, a U.s. resident, received the following income items for the current tax y

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, enterO". If required, round your answer to the nearest dollar. Transaction U.S.-Source Foreign-Source Income 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 C. $7,000 dividend from Stern Corporation, a U.S. corporation that had total operates solely in the eastern United States. 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 $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. d.

Explanation / Answer

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 $10,000 x 33.33% = $3,333.33 $10,000 x (1- 33.33%) = $6666.67

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