Question 1

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Accepted Answer

A)  Deducting the excess foreign taxes that do not qualify for the credit. 
B)  Repatriating more foreign income to the United States in the year there is an excess limitation. 
C)  Generating "same basket" foreign-source income that is subject to a tax rate higher than the U.S. tax rate. 
D)  Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S. tax rate. 
A)  Deducting the excess foreign taxes that do not qualify for the credit. 
B)  Repatriating more foreign income to the United States in the year there is an excess limitation. 
C)  Generating "same basket" foreign-source income that is subject to a tax rate higher than the U.S. tax rate. 
D)  Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S. tax rate. D

Question 2

ForCo, a subsidiary of a U.S. corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany. The income from the sale of widgets is not Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False  True

Question 3

Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30%.

Accepted Answer

A) True 
 B)False  False

Question 4

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Accepted Answer

A) True 
 B)False

Question 5

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

Accepted Answer

A) True 
 B)False

Question 6

USCo, a U.S. corporation, purchases inventory from distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. Profit on the sale is $10,000. What is the sourcing 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 7

The IRS can use § 482 reallocations to ensure that transactions between related parties are properly reflected in a tax return.

Accepted Answer

A) True 
 B)False

Question 8

Dividends received from Murdock Corp., a corporation organized in Sustenato that earns 70% of its income from
U.S. business activities, are 70% U.S.-source income.

Accepted Answer

A) True 
 B)False

Question 9

Describe and diagram the timeline that most businesses use to enter the international markets.

Accepted Answer

Most businesses ente

Question 10

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Accepted Answer

A) True 
 B)False

Question 11

Wellington, Inc., a U.S. corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year. Included in that amount is $20 million of Subpart F income. Wellington has been a CFC for the entire year and makes no distributions in the current year. Wellington must include in gross income:

Accepted Answer

A)  $0. 
B)  $6 million. 
C)  $20 million. 
D)  $50 million. 
A)  $0. 
B)  $6 million. 
C)  $20 million. 
D)  $50 million.

Question 12

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under
§ 367.

Accepted Answer

A) True 
 B)False

Question 13

An appropriate transfer price is one that considers the risks, assets, and functions of the persons to whom income is assigned.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Accepted Answer

A)  They allow for a deferral of non-U.S.-source income from U.S. taxation. 
B)  They provide certainty as to the U.S. income tax treatment of cross-border transactions. 
C)  They prevent shifting of income from the United States to high-tax non-U.S. jurisdictions. 
D)  They prevent shifting of income from the United States to low-tax non-U.S. jurisdictions. 
A)  They allow for a deferral of non-U.S.-source income from U.S. taxation. 
B)  They provide certainty as to the U.S. income tax treatment of cross-border transactions. 
C)  They prevent shifting of income from the United States to high-tax non-U.S. jurisdictions. 
D)  They prevent shifting of income from the United States to low-tax non-U.S. jurisdictions.

Question 15

U.S. income tax treaties:

Accepted Answer

A)  Involve three to seven countries as treaty partners. 
B)  Are renewable upon expiration every five years. 
C)  Are rare with countries in Africa. 
D)  Are rare with countries in Europe. 
A)  Involve three to seven countries as treaty partners. 
B)  Are renewable upon expiration every five years. 
C)  Are rare with countries in Africa. 
D)  Are rare with countries in Europe.

Question 16

Given the following information, determine whether FanCo, a foreign corporation, is a CFC.
$$\begin{array}{l}
\begin{array} { l c l } 
\text { Shareholders of } & \text { Voting } & \
\text { Foreign Corporation } & \text { Power } & \text { Classification } \
\text { Murray } & 24 \% & \text { U.S. person } \
\text { Nancy } & 20 \% & \text { U.S. person } \
\text { Otto } & 40 \% & \text { Foreign person } \
\text { Patricia } & 16 \% & \text { U.S. person }
\end{array}\
\text { Patricia is Murray's daughter. }
\end{array}$$

Accepted Answer

Voting Power Voting Power Total Sharehol

Question 17

Match the definition with the correct term.
-U.S. taxpayers earning income outside the United States.

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 18

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?

Accepted Answer

A)  $0 
B)  $300,000 
C)  $3 million 
D)  $5 million 
A)  $0 
B)  $300,000 
C)  $3 million 
D)  $5 million

Question 19

Peanut, Inc., a U.S. corporation, receives $500,000 of foreign-source interest income on which foreign taxes of $5,000 are withheld. Peanut's worldwide taxable income is $900,000, and its U.S. Federal income tax liability before
FTC is $189,000. What is Peanut's foreign tax credit?

Accepted Answer

A)  $500,000 
B)  $189,000 
C)  $105,000 
D)  $5,000 
A)  $500,000 
B)  $189,000 
C)  $105,000 
D)  $5,000

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.
-Upon repatriation to a CFC, it does not create dividend income.

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

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

ForCo, a subsidiary of a U.S. corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany. The income from the sale of widgets is not Subpart F foreign base company sales income.

Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30%.

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

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

The IRS can use § 482 reallocations to ensure that transactions between related parties are properly reflected in a tax return.

Dividends received from Murdock Corp., a corporation organized in Sustenato that earns 70% of its income from U.S. business activities, are 70% U.S.-source income.

Describe and diagram the timeline that most businesses use to enter the international markets.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

An appropriate transfer price is one that considers the risks, assets, and functions of the persons to whom income is assigned.

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

U.S. income tax treaties:

Given the following information, determine whether FanCo, a foreign corporation, is a CFC. Shareholders of Voting Foreign Corporation Power Classification Murray 24\% U.S. person Nancy 20\% U.S. person Otto 40\% Foreign person Patricia 16\% U.S. person Patricia is Murray's daughter.

Match the definition with the correct term. -U.S. taxpayers earning income outside the United States.

Peanut, Inc., a U.S. corporation, receives $500,000 of foreign-source interest income on which foreign taxes of $5,000 are withheld. Peanut's worldwide taxable income is $900,000, and its U.S. Federal income tax liability before FTC is $189,000. What is Peanut's foreign tax credit?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Upon repatriation to a CFC, it does not create dividend income.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, Operations, 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

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

ForCo, a subsidiary of a U.S. corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany. The income from the sale of widgets is not Subpart F foreign base company sales income.

Carol, a citizen and resident of Adagio, reports gross income that is effectively connected with a U.S. business. No deductions are allowed against this income, and Carol's U.S. tax rate is a flat 30%.

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, and constructively at least 50% of the voting power of a foreign corporation.

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

The IRS can use § 482 reallocations to ensure that transactions between related parties are properly reflected in a tax return.

Dividends received from Murdock Corp., a corporation organized in Sustenato that earns 70% of its income from U.S. business activities, are 70% U.S.-source income.

Describe and diagram the timeline that most businesses use to enter the international markets.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

An appropriate transfer price is one that considers the risks, assets, and functions of the persons to whom income is assigned.

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

U.S. income tax treaties:

Given the following information, determine whether FanCo, a foreign corporation, is a CFC. Shareholders of Voting Foreign Corporation Power Classification Murray 24\% U.S. person Nancy 20\% U.S. person Otto 40\% Foreign person Patricia 16\% U.S. person Patricia is Murray's daughter.

Match the definition with the correct term. -U.S. taxpayers earning income outside the United States.

Peanut, Inc., a U.S. corporation, receives $500,000 of foreign-source interest income on which foreign taxes of $5,000 are withheld. Peanut's worldwide taxable income is $900,000, and its U.S. Federal income tax liability before FTC is $189,000. What is Peanut's foreign tax credit?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Upon repatriation to a CFC, it does not create dividend income.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, Operations, 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