1.A, B, C and D, each own 25 percent of the stock of XYZ Corporation, a corporation organized in Brazil. A, B and C are U.S. citizens and residents. D is a foreign corporation. A, B, C and D are unrelated parties.

In Year 1, XYZ Corporation earns $400,000 in interest income and $800,000 in dividend income. XYZ Corporation made no distribution. The United States income tax result are:

a.Since no distribution was made there is no U.S. tax income tax due in Year 1.

b. A, B and C will each include $300,000 in their U.S. taxable income and pay U.S. income tax.

c. A, B, C and D will each include $300,000 in their U.S. taxable income and pay U.S. income tax.

d. A, B and C will each include $400,000 in their U.S. taxable income and pay U.S. income tax.

2.A, B, C and D, each own 25 percent of the stock of XYZ Corporation, a corporation organized in Brazil. A, B and C are U.S. citizens and residents. D is a foreign corporation. A, B, C and D are unrelated parties.

In Year 1, XYZ Corporation earns $400,000 in interest and $800,000 in dividend income. It also opens a computer service business in Brazil, which generates $28,000,000 in gross income. The United States income tax result are:

a.Since no distribution was made there is no U.S. tax income tax due in Year 1.

b.A, B and C will each include $300,000 in their U.S. taxable income and pay U.S. income tax.

c.A, B, C and D will each include $300,000 in their U.S. taxable income and pay U.S. income tax.

d. A, B and C will not include any of the income of XYZ Corporation because the de minimus exception is met.

3.A, B and C each own one third of the stock of XYZ Corporation, a corporation organized in Brazil. A, B and C are U.S. citizens and residents. A, B and C are unrelated parties.

In Year 1, XYZ Corporation earns $100,000 in interest and $200,000 in dividend income. It also opens a computer service business in Brazil, which generates $10,000,000 in gross income. The United States income tax result are:

a.Since no distribution was made there is no U.S. tax income tax due in Year 1.

b.A, B and C will each include $100,000 in their U.S. taxable income and pay U.S. income tax.

c.A, B and C will each include $3,433,000 in their U.S. taxable income and pay U.S. income tax because of the full inclusion rule.

d.A, B and C will not include any of the income of XYZ Corporation because the de minimus exception is met.

4.A, B and C each own one third of the stock of XYZ Corporation, a corporation organized in Brazil. A, B and C are U.S. citizens and residents. A, B and C are unrelated parties.

In Year 1, XYZ Corporation earns $700,000 in interest and $800,000 in dividend income. It also opens a computer service business in Brazil, which generates $600,000 in gross income. The United States income tax result are:

a.Since no distribution was made there is no U.S. tax income tax due in Year 1.

b.A, B and C will each include $500,000 in their U.S. taxable income and pay U.S. income tax.

c.A, B and C will each include $700,000 in their U.S. taxable income and pay U.S. income tax because of the full inclusion rule.

d.A, B and C will not include any of the income of XYZ Corporation because the de minimus exception is met.