Question 1

Given the following information, determine if FanCo, a foreign corporation, is a CFC.   
Patricia is Murray's daughter.

Accepted Answer

​ @#IMG-DLM& ​ Murray, Nancy, and Patricia are U.S

Question 2

GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?

Accepted Answer

A)  $0 
B)  $19,200 
C)  $60,800 
D)  $80,000 
A)  $0 
B)  $19,200 
C)  $60,800 
D)  $80,000

Question 3

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Accepted Answer

A) True 
 B)False

Question 4

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations. Ferrell owns the other 60 percent of Shane Corporation. Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 5

A Qualified Business Unit of a U.S. corporation that operates in Germany generally uses the Euro as its functional currency.

Accepted Answer

A) True 
 B)False

Question 6

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once
-Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

Accepted Answer

A) Foreign base company income 
B) Foreign personal holding company income 
C) Controlled foreign corporation 
D) U.S. shareholder 
E) Previously taxed income
F)More than 10 percent
G)More than 50 percent
H)More than 80 percent 
A) Foreign base company income 
B) Foreign personal holding company income 
C) Controlled foreign corporation 
D) U.S. shareholder 
E) Previously taxed income
F)More than 10 percent
G)More than 50 percent
H)More than 80 percent

Question 7

The following persons own Schlecht Corporation, a foreign corporation.   ​
None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Accepted Answer

A)  Schlecht is not a CFC. 
B)  Chee includes $90,000 in gross income. 
C)  Marina is not a U.S. shareholder for purposes of determining whether Schlecht is a CFC. 
D)  Marina includes $24,000 in gross income. 
A)  Schlecht is not a CFC. 
B)  Chee includes $90,000 in gross income. 
C)  Marina is not a U.S. shareholder for purposes of determining whether Schlecht is a CFC. 
D)  Marina includes $24,000 in gross income.

Question 8

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

Accepted Answer

A) True 
 B)False

Question 9

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

Accepted Answer

A)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because she is in the U.S. for 90 days or less. 
B)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because the amount paid to her is less than $3,000. 
C)  Chang has $2,500 U.S.-source income, because her foreign employer has a U.S. branch. 
D)  Chang has no U.S.-source income, under the commercial traveler exception. 
A)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because she is in the U.S. for 90 days or less. 
B)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because the amount paid to her is less than $3,000. 
C)  Chang has $2,500 U.S.-source income, because her foreign employer has a U.S. branch. 
D)  Chang has no U.S.-source income, under the commercial traveler exception.

Question 10

Which of the following statements regarding income sourcing is not correct?

Accepted Answer

A)  U.S. persons benefit from earning low-tax foreign-source income. 
B)  Foreign persons generally benefit from avoiding U.S.-source income classification. 
C)  U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system. 
D)  Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States. 
A)  U.S. persons benefit from earning low-tax foreign-source income. 
B)  Foreign persons generally benefit from avoiding U.S.-source income classification. 
C)  U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system. 
D)  Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States.

Question 11

Jokerz, a CFC of a U.S. parent, generated $80,000 Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

Accepted Answer

A) True 
 B)False

Question 12

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Accepted Answer

A) True 
 B)False

Question 13

USCo, a U.S. corporation, purchases inventory from distributors within the U.S. and resells this inventory to customers outside the U.S., with title passing outside the U.S. Profit on the sale is $10,000. What is the source of the USCo's inventory sales income?

Accepted Answer

A)  $5,000 U.S. source and $5,000 foreign source. 
B)  $5,000 U.S. source and $5,000 sourced based on location of the pertinent manufacturing assets. 
C)  $10,000 U.S. source. 
D)  $10,000 foreign source. 
A)  $5,000 U.S. source and $5,000 foreign source. 
B)  $5,000 U.S. source and $5,000 sourced based on location of the pertinent manufacturing assets. 
C)  $10,000 U.S. source. 
D)  $10,000 foreign source.

Question 14

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Accepted Answer

A)  U.S. persons with only U.S. activities. 
B)  U.S. persons that earn only tax-exempt income. 
C)  U.S. persons with U.S. and non-U.S. activities. 
D)  Non-U.S. persons with only non-U.S. activities. 
A)  U.S. persons with only U.S. activities. 
B)  U.S. persons that earn only tax-exempt income. 
C)  U.S. persons with U.S. and non-U.S. activities. 
D)  Non-U.S. persons with only non-U.S. activities.

Question 15

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows.   
​
Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

Accepted Answer

Using the asset method and the

Question 16

In 2013, George renounces his U.S. citizenship and moves to Fredonia, where income tax rates are very low. George is a multimillionaire and says he "has had it" with high Federal income taxes on wealthy individuals like himself. In 2016, George's U.S.-source income is $1.5 million. That income escapes Federal income taxes.

Accepted Answer

A) True 
 B)False

Question 17

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Accepted Answer

A)  Jen, Kathy, Leslie, David, Ben, and Mike are all U.S. citizens. 
B)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen. 
C)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Ben is Mike's son. Mike is a foreign resident and citizen. 
D)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Mike is a foreign resident and citizen. 
A)  Jen, Kathy, Leslie, David, Ben, and Mike are all U.S. citizens. 
B)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen. 
C)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Ben is Mike's son. Mike is a foreign resident and citizen. 
D)  Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Mike is a foreign resident and citizen.

Question 18

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S. multinational business.

Accepted Answer

A) True 
 B)False

Question 19

GreenCo, a U.S. corporation, earns $25 million of taxable income from U.S. sources and $10 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

Accepted Answer

A)  $25 million. 
B)  $35 million. 
C)  $25 million less any tax paid on the foreign income. 
D)  $35 million less any tax paid on U.S. income. 
A)  $25 million. 
B)  $35 million. 
C)  $25 million less any tax paid on the foreign income. 
D)  $35 million less any tax paid on U.S. income.

Question 20

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once
-Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

Accepted Answer

A) Indirect credit 
B) Direct credit 
C) One 
D) Two 
E) Ten
F)Twenty
G)Gross-up (§ 78)
H)Overall foreign loss 
A) Indirect credit 
B) Direct credit 
C) One 
D) Two 
E) Ten
F)Twenty
G)Gross-up (§ 78)
H)Overall foreign loss

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations. Ferrell owns the other 60 percent of Shane Corporation. Both Shane and Ferrell are CFCs.

A Qualified Business Unit of a U.S. corporation that operates in Germany generally uses the Euro as its functional currency.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

The following persons own Schlecht Corporation, a foreign corporation. None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

Which of the following statements regarding income sourcing is not correct?

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

USCo, a U.S. corporation, purchases inventory from distributors within the U.S. and resells this inventory to customers outside the U.S., with title passing outside the U.S. Profit on the sale is $10,000. What is the source of the USCo's inventory sales income?

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S. multinational business.

GreenCo, a U.S. corporation, earns $25 million of taxable income from U.S. sources and $10 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 9: Taxation of International Transactions

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Patricia is Murray's daughter.

GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations. Ferrell owns the other 60 percent of Shane Corporation. Both Shane and Ferrell are CFCs.

A Qualified Business Unit of a U.S. corporation that operates in Germany generally uses the Euro as its functional currency.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

The following persons own Schlecht Corporation, a foreign corporation. ​ None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $157,500 before FTC. Waltz's FTC is $50,000.

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

Which of the following statements regarding income sourcing is not correct?

The U.S. system for taxing income earned inside its borders by non-U.S. persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

USCo, a U.S. corporation, purchases inventory from distributors within the U.S. and resells this inventory to customers outside the U.S., with title passing outside the U.S. Profit on the sale is $10,000. What is the source of the USCo's inventory sales income?

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. ​ Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S. multinational business.

GreenCo, a U.S. corporation, earns $25 million of taxable income from U.S. sources and $10 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once -Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

The following persons own Schlecht Corporation, a foreign corporation. None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax book value) are as follows. Goolsbee incurs interest expense of $200,000. Using the asset method and the tax book value, apportion interest expense to foreign-source income.