Question

ForCo, a foreign corporation not engaged in a U.S. trade or business, recognizes a $3 million gain from the sale of land located in the United States. The amount realized on the sale was $50 million. Absent any exceptions, what is the required withholding amount on the part of the purchaser of this land?

a. $0

b. $5 million

c. $3 million

d. $300,000

Answer 1

Correct answer is option c. $3 million.

Step-by-step explanation:

Step 1. Given information.

• 3 million gain
• 50 million sales

Step 2. Formulas needed to solve the exercise.

The withholding amount on the part of the purchaser of this land = Total consideration value * 6%

Step 3. Calculation.

= $50 million *6%

= $3 million

Step 4. Solution.

Therefore correct answer is option c. $3 million.