Question 1

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 2

SilverCo, a U.S. corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation. SilverCo transfers $200 in Yen (basis = $150) and $900 in land (basis = $925) to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the United States. What gain or loss, if any, is recognized as a result of this transaction?

Accepted Answer

A) ($25) 
B) $0 
C) $25 
D) $50 
A) ($25) 
B) $0 
C) $25 
D) $50

Question 3

Match the definition with the correct term.
-Rule that requires determination of the dividend equivalent amount.

Accepted Answer

A) Expatriate 
B) Resident 
C) Nonresident alien 
D) U.S. trade or business 
E) Branch profits tax
F)Effectively connected income 
A) Expatriate 
B) Resident 
C) Nonresident alien 
D) U.S. trade or business 
E) Branch profits tax
F)Effectively connected income

Question 4

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the U.S. other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

Accepted Answer

A) $0, he is an NRA. 
B) The amount realized times the top individual tax rate. 
C) The net gain times the top capital gains tax rate. 
D) The net gain taxed at the lesser of the applicable regular or AMT rates. 
A) $0, he is an NRA. 
B) The amount realized times the top individual tax rate. 
C) The net gain times the top capital gains tax rate. 
D) The net gain taxed at the lesser of the applicable regular or AMT rates.

Question 5

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Accepted Answer

A) $0 
B) $50,000 
C) $85,000 
D) $100,000 
A) $0 
B) $50,000 
C) $85,000 
D) $100,000

Question 6

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S.?

Accepted Answer

A) Because the inventory is manufactured in the U.S., all of the inventory income is U.S. source. 
B) If title passes on the inventory outside the U.S., all of the inventory income is foreign source. 
C) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place. 
D) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets. 
A) Because the inventory is manufactured in the U.S., all of the inventory income is U.S. source. 
B) If title passes on the inventory outside the U.S., all of the inventory income is foreign source. 
C) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place. 
D) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets.

Question 7

Match the definition with the correct term.
-A country with very low or no income tax.

Accepted Answer

A) Inbound 
B) Outbound 
C) Allocation and apportionment 
D) Qualified business unit 
E) Tax haven
F)Income tax treaty
G)Section 482 
A) Inbound 
B) Outbound 
C) Allocation and apportionment 
D) Qualified business unit 
E) Tax haven
F)Income tax treaty
G)Section 482

Question 8

Section 482 is used by the Treasury to:

Accepted Answer

A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income, deductions, etc., to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S. corporations with non-U.S. owners. 
D) All of the above. 
E) None of the above. 
A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income, deductions, etc., to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S. corporations with non-U.S. owners. 
D) All of the above. 
E) None of the above.

Question 9

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Accepted Answer

U.S. persons are subject to worldwide ta

Question 10

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Which of the following is not a U.S. person?

Accepted Answer

A) Domestic corporation. 
B) Citizen of Turkey with U.S. permanent residence status (i.e., green card). 
C) U.S. corporation 100% owned by a foreign corporation. 
D) Foreign corporation 100% owned by a domestic corporation. 
A) Domestic corporation. 
B) Citizen of Turkey with U.S. permanent residence status (i.e., green card). 
C) U.S. corporation 100% owned by a foreign corporation. 
D) Foreign corporation 100% owned by a domestic corporation.

Question 13

U.S. individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Wood, a U.S. corporation, owns 30% of Hout, a foreign corporation. The remaining 70% of Hout is owned by other foreign corporations not controlled by Wood. Hout's functional currency is the euro. Wood receives a 50,000€ distribution from Hout. If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1, the exchange rate at year end is .95€: $1, and on the date of the dividend payment the exchange rate is 1.1€: $1, what is Wood's tax result from the distribution?

Accepted Answer

A) Wood receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2)]. 
B) Wood receives a dividend of $52,632 (50,000€/.95) with no exchange gain or loss. 
C) Wood receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) Wood receives a dividend of $45,455 (50,000€/1.1) with no exchange gain or loss. 
A) Wood receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2)]. 
B) Wood receives a dividend of $52,632 (50,000€/.95) with no exchange gain or loss. 
C) Wood receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) Wood receives a dividend of $45,455 (50,000€/1.1) with no exchange gain or loss.

Question 16

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $800,000 (the 35% marginal tax rate applies). Jaime's current year FTC is $87,500.

Accepted Answer

A) True 
 B)False

Question 17

Flapp Corporation, a U.S. corporation, conducts all of its transactions in the U.S. dollar. It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can. The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can. What is Flapp's exchange gain or loss on this sale?

Accepted Answer

A) Flapp does not have a foreign currency exchange gain or loss, since it conducts all of its transactions in the U.S. dollar. 
B) Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.) and it collects on the receivable when the exchange rate is $1US: $1.25Can. Flapp has an exchange gain of $50,000. 
C) Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.). It collects on the receivable at $1US: $1.25Can. Flapp has an exchange loss of $5,000. 
D) Flapp's foreign currency exchange loss is $50,000. 
A) Flapp does not have a foreign currency exchange gain or loss, since it conducts all of its transactions in the U.S. dollar. 
B) Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.) and it collects on the receivable when the exchange rate is $1US: $1.25Can. Flapp has an exchange gain of $50,000. 
C) Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.). It collects on the receivable at $1US: $1.25Can. Flapp has an exchange loss of $5,000. 
D) Flapp's foreign currency exchange loss is $50,000.

Question 18

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.8€. Wood's exchange gain or loss is:

Accepted Answer

A) $15,000 loss. 
B) $15,000 gain. 
C) $75,000 gain. 
D) $0. There is no exchange gain or loss on a dividend distribution. 
A) $15,000 loss. 
B) $15,000 gain. 
C) $75,000 gain. 
D) $0. There is no exchange gain or loss on a dividend distribution.

Question 19

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

Accepted Answer

A) True 
 B)False

Question 20

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

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. -Rule that requires determination of the dividend equivalent amount.

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the U.S. other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S.?

Match the definition with the correct term. -A country with very low or no income tax.

Section 482 is used by the Treasury to:

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

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 is not a U.S. person?

U.S. individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

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

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $800,000 (the 35% marginal tax rate applies). Jaime's current year FTC is $87,500.

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.8€. Wood's exchange gain or loss is:

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

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?

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

Multi-State Corporate Taxations

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

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. -Rule that requires determination of the dividend equivalent amount.

Mitch, an NRA, sells a building in Omaha for $1 million. His basis in the building is zero for both regular tax and AMT purposes. Mitch has no other contact with the U.S. other than the ownership of the building. How much Federal income tax is due from Mitch on the sale?

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S.?

Match the definition with the correct term. -A country with very low or no income tax.

Section 482 is used by the Treasury to:

With respect to income generated by non-U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

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 is not a U.S. person?

U.S. individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

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

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $800,000 (the 35% marginal tax rate applies). Jaime's current year FTC is $87,500.

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.8€. Wood's exchange gain or loss is:

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

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?

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

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters