Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  U.S. taxpayers with a foreign branch can reduce part or all of their U.S. taxes by the foreign tax credit. 
B)  A foreign corporation's (less than 50% ownership) are not taxed until repatriated. 
C)  A domestic subsidiary's earnings are taxed in the year earned. 
D)  All of a controlled foreign corporation's earnings are taxed as earned. 
A)  U.S. taxpayers with a foreign branch can reduce part or all of their U.S. taxes by the foreign tax credit. 
B)  A foreign corporation's (less than 50% ownership) are not taxed until repatriated. 
C)  A domestic subsidiary's earnings are taxed in the year earned. 
D)  All of a controlled foreign corporation's earnings are taxed as earned.

Question 2

Nathan is single and owns a 54% interest in the new NT Partnership, a calendar- year entity. The NT Partnership reports $100,000 of profits for its first year. Assuming Nathan is taxed at a 35% marginal tax rate on the additional income, how much tax does Nathan owe if the NT Partnership does not distribute any of its profits to him?

Accepted Answer

Nathan owes tax on 54% of NT P

Question 3

A foreign corporation is a CFC that is in its initial year of operation. For the current year, it reports $1 million of earnings and has an aggregate U.S. Property investment of $400,000. If none of the earnings qualified as Subpart F income, explain how the earnings are taxed.

Accepted Answer

By making the $400,000 investm

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  When a cash- basis taxpayer elects to take a credit for accrued foreign income taxes, certain other income and expense items must likewise be accrued. 
B)  A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S. citizen or a resident alien sometime during the tax year and both spouses consent. 
C)  The taxpayer may revoke an election to exclude foreign- source earned income if a loss is incurred from foreign employment. 
D)  All of the above are true. 
A)  When a cash- basis taxpayer elects to take a credit for accrued foreign income taxes, certain other income and expense items must likewise be accrued. 
B)  A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S. citizen or a resident alien sometime during the tax year and both spouses consent. 
C)  The taxpayer may revoke an election to exclude foreign- source earned income if a loss is incurred from foreign employment. 
D)  All of the above are true.

Question 5

Identify which of the following statements is true.

Accepted Answer

A)  Nonresident aliens and foreign corporations are not subject to U.S. taxation on their non- U.S. source investment income and part or all of their non- U.S. source trade or business income. 
B)  In a particular year, the overall foreign tax credit limitation permits a taxpayer to offset "excess" foreign taxes paid in one country against "excess" limitation amounts originating in other countries. 
C)  U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates. 
D)  All of the above are true. 
A)  Nonresident aliens and foreign corporations are not subject to U.S. taxation on their non- U.S. source investment income and part or all of their non- U.S. source trade or business income. 
B)  In a particular year, the overall foreign tax credit limitation permits a taxpayer to offset "excess" foreign taxes paid in one country against "excess" limitation amounts originating in other countries. 
C)  U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates. 
D)  All of the above are true.

Question 6

Mr. Big, a nonshareholder, who is not a customer, potential customer, governmental entity, or civic group, contributes $60,000 cash and land worth $100,000 to induce Carrie Corporation to relocate to his municipality. Carrie Corporation spent $50,000 of the cash within the first 12 months of his contribution to purchase machinery. The contribution results in

Accepted Answer

A)  Carrie Corporation recognizes no income as a result of the contribution, the land and machinery have a basis of zero. 
B)  Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of zero, and the machinery has a basis of $50,000. 
C)  Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of $100,000, and the machinery has a basis of $60,000. 
D)  Carrie Corporation recognizes $160,000 of income. 
A)  Carrie Corporation recognizes no income as a result of the contribution, the land and machinery have a basis of zero. 
B)  Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of zero, and the machinery has a basis of $50,000. 
C)  Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of $100,000, and the machinery has a basis of $60,000. 
D)  Carrie Corporation recognizes $160,000 of income.

Question 7

Ra Corporation issues a twenty- year obligation at its $1,000 face amount. Rames purchases the obligation for
$1,000 on the issue date. Due to a decline in interest rates, Ra calls the obligation by paying $1,010 to each of the holders of the twenty- year obligations. What is the tax treatment of the $1,010 by Ra and Rames?

Accepted Answer

Rames will recognize a $10 cap

Question 8

Identify which of the following statements is true.

Accepted Answer

A)  A corporation receiving property in a Sec. 351 exchange can select any MACRS depreciation method for the asset. 
B)  The transferor must recapture depreciation when exchanging Sec. 1245 property in all transactions coming under Sec. 351. 
C)  When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D)  All of the above are false. 
A)  A corporation receiving property in a Sec. 351 exchange can select any MACRS depreciation method for the asset. 
B)  The transferor must recapture depreciation when exchanging Sec. 1245 property in all transactions coming under Sec. 351. 
C)  When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D)  All of the above are false.

Question 9

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

Accepted Answer

A)  The nonresident alien's U.S. tax rate is 30% unless reduced by a tax treaty. 
B)  The domestic corporation must withhold the U.S. taxes from the alien's dividend payment. 
C)  The nonresident alien must pay estimated taxes on the dividend income at a 30% rate. 
D)  The 30% tax rate is applied against gross income. 
A)  The nonresident alien's U.S. tax rate is 30% unless reduced by a tax treaty. 
B)  The domestic corporation must withhold the U.S. taxes from the alien's dividend payment. 
C)  The nonresident alien must pay estimated taxes on the dividend income at a 30% rate. 
D)  The 30% tax rate is applied against gross income.

Question 10

A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period and maintains a tax home there has satisfied the bona fide foreign resident test.

Accepted Answer

A) True 
 B)False

Question 11

Gene purchased land five years ago as an investment. The land cost him $200,000 and is now worth $530,000. Gene plans to transfer the land to Dee Corporation, which will subdivide the land and sell individual parcels. Dee Corporation's profits on the land will be ordinary income. What are the tax consequences of the asset transfer and land sales if Gene contributes the land to Dee Corporation in exchange for all of its stock? What alternative methods can be used to structure the transaction to achieve better tax consequences?

Accepted Answer

Gene recognizes no gain when he transfer

Question 12

Zeta Corporation, incorporated in Country Z, is 100% owned by Zelda Corporation, a U.S. corporation. Zelda purchases some machines from an unrelated corporation, for use in Country A. The portion of the sales contract covering installation and maintenance of the machines is assigned by Zelda to Zeta. Zeta is to be paid for these services by Zelda. Does this qualify as foreign base company services income?

Accepted Answer

Yes, because it is performed f

Question 13

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

Accepted Answer

A) True 
 B)False

Question 14

South Corporation acquires 100 shares of treasury stock for $10,000. The next year, South reissues the 100 shares for land having a $15,000 FMV. What is the amount of gain or loss realized by South Corporation, and how much is recognized?

Accepted Answer

South realizes a $5,

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  Only transfers to newly created corporations qualify for Sec. 351 treatment. 
B)  If a shareholder receives stock with an FMV greater than the FMV of the property exchanged in a Sec. 351 transaction, the excess FMV may be considered a gift from one shareholder to another shareholder. 
C)  To qualify for Sec. 351 treatment, control is defined as more than 50% ownership of the voting stock, and more than 50% of all other classes of stock. 
D)  All of the above are false. 
A)  Only transfers to newly created corporations qualify for Sec. 351 treatment. 
B)  If a shareholder receives stock with an FMV greater than the FMV of the property exchanged in a Sec. 351 transaction, the excess FMV may be considered a gift from one shareholder to another shareholder. 
C)  To qualify for Sec. 351 treatment, control is defined as more than 50% ownership of the voting stock, and more than 50% of all other classes of stock. 
D)  All of the above are false.

Question 16

U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates.

Accepted Answer

A) True 
 B)False

Question 17

Compare the U.S. tax treatment of a nonresident alien and a resident alien, both of whom earn U.S. trade or business and U.S. investment income.

Accepted Answer

A nonresident alien who earns investment

Question 18

A taxpayer may make the election to either deduct or take a credit for foreign income taxes

Accepted Answer

A)  once every five years. 
B)  only once, and the election applies to all future tax years. 
C)  annually. 
D)  No election is available. 
A)  once every five years. 
B)  only once, and the election applies to all future tax years. 
C)  annually. 
D)  No election is available.

Question 19

Jermaine owns all 200 shares of Peach Corporation stock valued at $50,000. Kenya, a new shareholder, receives 200 newly issued shares from Peach Corporation in exchange for inventory with an adjusted basis of $40,000 and an FMV of $50,000. Which of the following statements is correct?

Accepted Answer

A)  The transaction results in $10,000 of ordinary income for Kenya. 
B)  No gain will be recognized by Kenya. 
C)  Kenya may defer the recognition of any tax until the stock is sold. 
D)  The transaction results in $10,000 of capital gain for Kenya. 
A)  The transaction results in $10,000 of ordinary income for Kenya. 
B)  No gain will be recognized by Kenya. 
C)  Kenya may defer the recognition of any tax until the stock is sold. 
D)  The transaction results in $10,000 of capital gain for Kenya.

Question 20

Darnell, who is single, exchanges property having a $60,000 adjusted basis and a $50,000 FMV for 1,000 shares of Fox Corporation stock in a transaction qualifying under Sec. 351. The stock qualifies as Sec. 1244 stock. If Darnell sells his stock for $30,000, what is the amount and character of his recognized gain or loss?

Accepted Answer

Darnell has a $20,000 ordinary loss and

Which of the following statements is incorrect?

A foreign corporation is a CFC that is in its initial year of operation. For the current year, it reports $1 million of earnings and has an aggregate U.S. Property investment of $400,000. If none of the earnings qualified as Subpart F income, explain how the earnings are taxed.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period and maintains a tax home there has satisfied the bona fide foreign resident test.

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

South Corporation acquires 100 shares of treasury stock for $10,000. The next year, South reissues the 100 shares for land having a $15,000 FMV. What is the amount of gain or loss realized by South Corporation, and how much is recognized?

Identify which of the following statements is true.

U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates.

Compare the U.S. tax treatment of a nonresident alien and a resident alien, both of whom earn U.S. trade or business and U.S. investment income.

A taxpayer may make the election to either deduct or take a credit for foreign income taxes

Jermaine owns all 200 shares of Peach Corporation stock valued at $50,000. Kenya, a new shareholder, receives 200 newly issued shares from Peach Corporation in exchange for inventory with an adjusted basis of $40,000 and an FMV of $50,000. Which of the following statements is correct?

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters

Exam 2: Corporate Formations and Capital Structure

Which of the following statements is incorrect?

A foreign corporation is a CFC that is in its initial year of operation. For the current year, it reports $1 million of earnings and has an aggregate U.S. Property investment of $400,000. If none of the earnings qualified as Subpart F income, explain how the earnings are taxed.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

A taxpayer who is physically present in a foreign country for 330 full days out of a 12- month period and maintains a tax home there has satisfied the bona fide foreign resident test.

Section 351 applies to an exchange if the contributing shareholders own more than 50% of a corporation's stock after the transfer.

South Corporation acquires 100 shares of treasury stock for $10,000. The next year, South reissues the 100 shares for land having a $15,000 FMV. What is the amount of gain or loss realized by South Corporation, and how much is recognized?

Identify which of the following statements is true.

U.S. citizens, resident aliens, and domestic corporations are taxed by the U.S. government on their worldwide income at regular U.S. tax rates.

Compare the U.S. tax treatment of a nonresident alien and a resident alien, both of whom earn U.S. trade or business and U.S. investment income.

A taxpayer may make the election to either deduct or take a credit for foreign income taxes

Jermaine owns all 200 shares of Peach Corporation stock valued at $50,000. Kenya, a new shareholder, receives 200 newly issued shares from Peach Corporation in exchange for inventory with an adjusted basis of $40,000 and an FMV of $50,000. Which of the following statements is correct?

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Filters