Question

Russell Starling, an Australian citizen and resident, received the following investment income during the current year: $5,000 of dividend income from ownership of stock in a U.S. corporation, $10,000 interest from a certificate of deposit in a U.S. bank, $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen, and $2,000 capital gain from sale of a stock in a U.S. corporation. How much of Russell's income will be subject to U.S. taxation

Answer 1

Answer: $8000

Explanation:

The amount of Russell's income that will be subject to U.S. taxation will be the $5,000 of dividend income from ownership of stock in a U.S. corporation and the $3,000 of interest income earned from a loan to Clint Westwood, a U.S. citizen.

Both the interest that is earned from a deposit in the U.S. bank and the capital gain are both exempted from the U.S. tax due to the fact that the income is from a foreign source income. Therefore, Russell's income that will be subject to U.S. taxation will be:

= $5000 + $3000

= $8000