Question 1

A controlled foreign corporation CFC) realizes Subpart F income from:

Accepted Answer

A)  Purchase of inventory from an unrelated U.S. person and sale outside the CFC country. 
B)  Purchase of inventory from a related U.S. person and sale outside the CFC country. 
C)  Services performed for the U.S. parent in a country in which the CFC was organized. 
D)  Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized. 
A)  Purchase of inventory from an unrelated U.S. person and sale outside the CFC country. 
B)  Purchase of inventory from a related U.S. person and sale outside the CFC country. 
C)  Services performed for the U.S. parent in a country in which the CFC was organized. 
D)  Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized.

Question 2

Julio, a nonresident alien, realizes a gain on the sale of commercial real estate located in Omaha. The real estate was sold to Mariana, Julio's cousin who is also a nonresident alien. Julio recognizes foreign-source income from the sale because his home country is not the United States.

Accepted Answer

A) True 
 B)False

Question 3

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 $840,000 the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Accepted Answer

A) True 
 B)False

Question 4

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following situations requires the filing of an information return with the U.S. government?

Accepted Answer

A)  A domestic corporation that is 25% or more foreign owned. 
B)  A foreign corporation carrying on a trade or business in the United States. 
C)  U.S. persons who acquire or dispose of an interest in a foreign partnership. 
D)  All of these. 
E)  None of these. 
A)  A domestic corporation that is 25% or more foreign owned. 
B)  A foreign corporation carrying on a trade or business in the United States. 
C)  U.S. persons who acquire or dispose of an interest in a foreign partnership. 
D)  All of these. 
E)  None of these.

Question 6

Section 482 is used by the U.S. 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 these. 
E)  None of these. 
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 these. 
E)  None of these.

Question 7

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: $1.3Can. 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: $1.3Can. Flapp has an exchange gain of $100,000. 
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: $1.3Can. Flapp has an exchange loss of $10,000. 
D)  Flapp's foreign currency exchange loss is $100,000. 
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: $1.3Can. Flapp has an exchange gain of $100,000. 
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: $1.3Can. Flapp has an exchange loss of $10,000. 
D)  Flapp's foreign currency exchange loss is $100,000.

Question 8

Match the definition with the correct term.
-Activity that creates the potential for effectively connected income.

Accepted Answer

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

Question 9

Match the definition with the correct term.
-Foreign taxpayers earning income inside 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 10

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A)  Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S. persons. 
B)  Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S. persons. 
C)  Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S. persons. 
D)  Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S. persons. 
A)  Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S. persons. 
B)  Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S. persons. 
C)  Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S. persons. 
D)  Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S. persons.

Question 11

Magdala is a citizen of Italy and does not have permanent resident status in the United States. During the last three years, she has spent a number of days in the United States: Current year - 120 days First prior year - 150 days Second prior year - 150 days
Is Magdala treated as a U.S. resident for the current year?

Accepted Answer

A)  Yes, because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years using the appropriate fractions for the prior years). 
B)  No, because Magdala is a citizen of Italy. 
C)  No, because Magdala was not present in the United States at least 183 days during the current year. 
D)  No, because although Magdala was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years. 
A)  Yes, because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years using the appropriate fractions for the prior years). 
B)  No, because Magdala is a citizen of Italy. 
C)  No, because Magdala was not present in the United States at least 183 days during the current year. 
D)  No, because although Magdala was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years.

Question 12

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 13

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

Accepted Answer

A)  FIRPTA gains. 
B)  Capital gains effectively connected with a U.S. trade or business. 
C)  Net long-term capital gains for which no U.S. trade or business exists. 
D)  Interest income effectively connected with a U.S. trade or business. 
A)  FIRPTA gains. 
B)  Capital gains effectively connected with a U.S. trade or business. 
C)  Net long-term capital gains for which no U.S. trade or business exists. 
D)  Interest income effectively connected with a U.S. trade or business.

Question 14

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

Accepted Answer

A)  Because the inventory is manufactured in the United States, all of the inventory income is U.S. source. 
B)  If title passes on the inventory outside the United States, all of the inventory income is foreign source. 
C)  The taxpayer may 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 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 United States, all of the inventory income is U.S. source. 
B)  If title passes on the inventory outside the United States, all of the inventory income is foreign source. 
C)  The taxpayer may 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 source one-half the income based on title passage and one-half the income based on location of production assets.

Question 15

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 United States 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 United States 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 16

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a principle used in applying the income-sourcing rules under U.S. tax law?

Accepted Answer

A)  The rules should be acceptable to both countries. 
B)  The rules should favor the U.S. Treasury. 
C)  The rules should favor the treasury of the non-U.S. country. 
D)  The rules should apply to income items only; deductions need not be sourced in this way. 
A)  The rules should be acceptable to both countries. 
B)  The rules should favor the U.S. Treasury. 
C)  The rules should favor the treasury of the non-U.S. country. 
D)  The rules should apply to income items only; deductions need not be sourced in this way.

Question 18

Arendt, Inc., a U.S. corporation, purchases a piece of equipment for use in its manufacture of custom pianos. The equipment is acquired in Ireland at a cost of 200,000 euros when 1€: $1.25. Payment is due in 90 days. Arendt acquires 200,000 euros and pays for the machine when 1€: $1.15. What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?

Accepted Answer

No foreign currency exchange gain or los

Question 19

Match the definition with the correct term.
-A non-U.S. citizen who holds a "green card."

Accepted Answer

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

Question 20

Match the definition with the correct term.
-Individual who is not a U.S. citizen or resident.

Accepted Answer

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

A controlled foreign corporation CFC) realizes Subpart F income from:

Julio, a nonresident alien, realizes a gain on the sale of commercial real estate located in Omaha. The real estate was sold to Mariana, Julio's cousin who is also a nonresident alien. Julio recognizes foreign-source income from the sale because his home country is not the United States.

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 $840,000 the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

Which of the following situations requires the filing of an information return with the U.S. government?

Section 482 is used by the U.S. Treasury to:

Match the definition with the correct term. -Activity that creates the potential for effectively connected income.

Match the definition with the correct term. -Foreign taxpayers earning income inside the United States.

Which of the following statements regarding income sourcing is correct?

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

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

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

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.

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Which of the following is a principle used in applying the income-sourcing rules under U.S. tax law?

Match the definition with the correct term. -A non-U.S. citizen who holds a "green card."

Match the definition with the correct term. -Individual who is not a U.S. citizen or resident.

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

A controlled foreign corporation CFC) realizes Subpart F income from:

Julio, a nonresident alien, realizes a gain on the sale of commercial real estate located in Omaha. The real estate was sold to Mariana, Julio's cousin who is also a nonresident alien. Julio recognizes foreign-source income from the sale because his home country is not the United States.

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 $840,000 the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

Which of the following situations requires the filing of an information return with the U.S. government?

Section 482 is used by the U.S. Treasury to:

Match the definition with the correct term. -Activity that creates the potential for effectively connected income.

Match the definition with the correct term. -Foreign taxpayers earning income inside the United States.

Which of the following statements regarding income sourcing is correct?

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

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

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

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.

Interest paid to an unrelated party by a domestic corporation that historically earns more than 50% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Which of the following is a principle used in applying the income-sourcing rules under U.S. tax law?

Match the definition with the correct term. -A non-U.S. citizen who holds a "green card."

Match the definition with the correct term. -Individual who is not a U.S. citizen or resident.

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