Question 1

What is another name for the worldwide approach of tax jurisdiction?

Accepted Answer

A) Nationality approach 
B) Global approach 
C) International approach 
D) Boundary approach 
A) Nationality approach 
B) Global approach 
C) International approach 
D) Boundary approach

Question 2

In general, why do countries wish to avoid double taxation on corporations?

Accepted Answer

A) The calculations of the taxes are excessively complex. 
B) It discourages foreign direct investment. 
C) Enforcement of the tax law becomes excessively burdensome. 
D) It contributes to accounting diversity. 
A) The calculations of the taxes are excessively complex. 
B) It discourages foreign direct investment. 
C) Enforcement of the tax law becomes excessively burdensome. 
D) It contributes to accounting diversity.

Question 3

The Organization for Economic Cooperation and Development (OECD) has established guidelines to eliminate tax havens.Why, then, can the OECD (as of 2004) still identify over 30 countries as tax havens?

Accepted Answer

A) The definition of tax haven continuously changes. 
B) The concept of tax haven is supported by the United Nations. 
C) The OECD has no enforcement powers. 
D) The OECD lacks the willingness to enforce the guidelines. 
A) The definition of tax haven continuously changes. 
B) The concept of tax haven is supported by the United Nations. 
C) The OECD has no enforcement powers. 
D) The OECD lacks the willingness to enforce the guidelines.

Question 4

Under U.S.tax law, what is the basis for the overall foreign tax credit limitation?

Accepted Answer

A) To make sure that foreign governments get their fair share of a foreign subsidiary's income 
B) To ensure that the foreign tax credit taken by a corporation does not exceed the actual foreign tax it paid 
C) To make sure that the foreign tax credit taken by a corporation does not exceed the amount of taxes the foreign affiliate would have paid in the U.S. 
D) To minimize world-wide taxes on the U.S.corporation 
A) To make sure that foreign governments get their fair share of a foreign subsidiary's income 
B) To ensure that the foreign tax credit taken by a corporation does not exceed the actual foreign tax it paid 
C) To make sure that the foreign tax credit taken by a corporation does not exceed the amount of taxes the foreign affiliate would have paid in the U.S. 
D) To minimize world-wide taxes on the U.S.corporation

Question 5

What is the main advantage of the American Jobs Creation Act of 2004 over the Tax Reform Act of 1986 relative to FTC baskets?

Accepted Answer

A) A newer tax act is always more advantageous. 
B) It has much fewer baskets and, as a result, more chance that a company won't have excess unused FTCs. 
C) There is no advantage, as excess FTC's from one basket still can't be used to offset tax in another basket. 
D) The carryforward period for excess FTC's was extended. 
A) A newer tax act is always more advantageous. 
B) It has much fewer baskets and, as a result, more chance that a company won't have excess unused FTCs. 
C) There is no advantage, as excess FTC's from one basket still can't be used to offset tax in another basket. 
D) The carryforward period for excess FTC's was extended.

Question 6

What causes double taxation?

Accepted Answer

A) A taxpayer being subject to tax laws in multiple jurisdictions 
B) Profits increasing excessively from year to year 
C) Penalties imposed by a taxing authority for non-payment of taxes 
D) None of the above 
A) A taxpayer being subject to tax laws in multiple jurisdictions 
B) Profits increasing excessively from year to year 
C) Penalties imposed by a taxing authority for non-payment of taxes 
D) None of the above

Question 7

Under the U.S.model tax treaty, which of the following statements is correct?

Accepted Answer

A) Interest and royalties are exempt from withholding. 
B) Dividends are subject to a maximum 20% withholding. 
C) Interest and royalties are subject to a maximum 15% withholding. 
D) No passive income is exempt from withholding. 
A) Interest and royalties are exempt from withholding. 
B) Dividends are subject to a maximum 20% withholding. 
C) Interest and royalties are subject to a maximum 15% withholding. 
D) No passive income is exempt from withholding.

Question 8

What is meant by the term "thin capitalization?"

Accepted Answer

A) Undervaluing foreign investments 
B) Using as little debt financing as a country will allow 
C) Minimizing the amount of equity capital used to fund foreign operations 
D) Creating transparency in the methods used to fund foreign operations 
A) Undervaluing foreign investments 
B) Using as little debt financing as a country will allow 
C) Minimizing the amount of equity capital used to fund foreign operations 
D) Creating transparency in the methods used to fund foreign operations

Question 9

Under the American Jobs Creation Act of 2004, how many FTC baskets are used to classify foreign source income?

Accepted Answer

A) 9 
B) 2 
C) 12 
D) 11 
A) 9 
B) 2 
C) 12 
D) 11

Question 10

An indirect foreign tax credit arises when:

Accepted Answer

A) taxes paid by a parent on foreign branch income is deducted from taxes owed to the parent's home country. 
B) taxes paid by a foreign subsidiary are taken as a credit against a parent's taxes when dividends are received from the subsidiary. 
C) taxing jurisdictions agree to share the taxes paid by a foreign subsidiary. 
D) a foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and allows the parent country to tax the foreign source income. 
A) taxes paid by a parent on foreign branch income is deducted from taxes owed to the parent's home country. 
B) taxes paid by a foreign subsidiary are taken as a credit against a parent's taxes when dividends are received from the subsidiary. 
C) taxing jurisdictions agree to share the taxes paid by a foreign subsidiary. 
D) a foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and allows the parent country to tax the foreign source income.

Question 11

The subsidiary of a U.S.corporation located in Country Y generated income of $1,000,000 on which it paid $200,000 in taxes to Country Y.The subsidiary paid a dividend to the U.S.parent of $150,000.How much tax is currently owed to the U.S.government if the federal tax rate is 35%?

Accepted Answer

A) $35,625 
B) $28,125 
C) $52,500 
D) $32,500 
A) $35,625 
B) $28,125 
C) $52,500 
D) $32,500

Question 12

Under U.S.tax laws, how are taxes paid by U.S.corporations to foreign governments treated?

Accepted Answer

A) Total domestic taxes paid in U.S.are deductions in calculating taxable income. 
B) Domestic income taxes owed are credits against U.S.taxes owed. 
C) Taxpayers may choose to deduct total foreign taxes paid or take credit for foreign income taxes. 
D) None of the above 
A) Total domestic taxes paid in U.S.are deductions in calculating taxable income. 
B) Domestic income taxes owed are credits against U.S.taxes owed. 
C) Taxpayers may choose to deduct total foreign taxes paid or take credit for foreign income taxes. 
D) None of the above

Question 13

Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC 2,500,000.Beako distributed the diamonds to its customers and received FC 4,000,000.If the national VAT is 20%, how much tax did Beako pay?

Accepted Answer

A) FC 200,000 
B) FC 500,000 
C) FC 300,000 
D) FC 800,000 
A) FC 200,000 
B) FC 500,000 
C) FC 300,000 
D) FC 800,000

Question 14

Which of the following is the most important type of Subpart F income?

Accepted Answer

A) Income from countries engaged in international boycotts 
B) Income from foreign base companies 
C) Income from insurance of U.S.risks 
D) Income from illegal payments 
A) Income from countries engaged in international boycotts 
B) Income from foreign base companies 
C) Income from insurance of U.S.risks 
D) Income from illegal payments

Question 15

What is the optimal tax objective for multinational corporations?

Accepted Answer

A) Minimize domestic taxes paid on worldwide income 
B) Minimize worldwide taxes paid, within the limitations of applicable tax law 
C) Minimize the credit for worldwide taxes paid 
D) Minimize foreign taxes 
A) Minimize domestic taxes paid on worldwide income 
B) Minimize worldwide taxes paid, within the limitations of applicable tax law 
C) Minimize the credit for worldwide taxes paid 
D) Minimize foreign taxes

Question 16

How might a parent company's home country eliminate double taxation on foreign source income?

Accepted Answer

A) Tax credits for taxes paid to foreign countries 
B) Tax deductions for taxes paid to foreign countries 
C) Taking a territorial approach to taxing income 
D) All of the above 
A) Tax credits for taxes paid to foreign countries 
B) Tax deductions for taxes paid to foreign countries 
C) Taking a territorial approach to taxing income 
D) All of the above

Question 17

What is a primary difference between the OECD and UN model tax treaties?

Accepted Answer

A) The UN model assumes all countries are economic equals, whereas the OECD model does not. 
B) The UN model grants more taxing rights to the host country than does the OECD model when income repatriation is out of developing countries. 
C) The model treaty of the UN gives more taxing rights to well-developed countries than developing countries. 
D) All of the above are differences between the OECD and UN models. 
A) The UN model assumes all countries are economic equals, whereas the OECD model does not. 
B) The UN model grants more taxing rights to the host country than does the OECD model when income repatriation is out of developing countries. 
C) The model treaty of the UN gives more taxing rights to well-developed countries than developing countries. 
D) All of the above are differences between the OECD and UN models.

Question 18

The nine categories of foreign source income defined by the Tax Reform Act of 1986 are referred to as:

Accepted Answer

A) FTC rates. 
B) FTC credits. 
C) FTC baskets. 
D) FTC brackets. 
A) FTC rates. 
B) FTC credits. 
C) FTC baskets. 
D) FTC brackets.

Question 19

To determine U.S.taxable income, foreign branch net income is grossed up by:

Accepted Answer

A) adding taxes paid to the foreign government translated at the exchange rate at the end of the year. 
B) deducting taxes paid to the domestic government translated at the exchange rate at the date of payment. 
C) adding taxes paid to the foreign government translated at the exchange rate at the date of payment. 
D) deducting taxes paid to the foreign government translated at the exchange rate at the date of payment. 
A) adding taxes paid to the foreign government translated at the exchange rate at the end of the year. 
B) deducting taxes paid to the domestic government translated at the exchange rate at the date of payment. 
C) adding taxes paid to the foreign government translated at the exchange rate at the date of payment. 
D) deducting taxes paid to the foreign government translated at the exchange rate at the date of payment.

Question 20

What is the U.S.policy concerning taxing income of a foreign branch of a U.S.corporation?

Accepted Answer

A) Tax is imposed on the foreign branch income in the year it is earned. 
B) Tax is paid on the foreign branch's income when the profits are returned to the U.S.parent as dividends. 
C) The government of the U.S.does not tax foreign source income. 
D) Tax credits for losses incurred by the foreign branch are recognized by the parent currently, but taxes on profits are deferred until dividends are paid. 
A) Tax is imposed on the foreign branch income in the year it is earned. 
B) Tax is paid on the foreign branch's income when the profits are returned to the U.S.parent as dividends. 
C) The government of the U.S.does not tax foreign source income. 
D) Tax credits for losses incurred by the foreign branch are recognized by the parent currently, but taxes on profits are deferred until dividends are paid.

What is another name for the worldwide approach of tax jurisdiction?

In general, why do countries wish to avoid double taxation on corporations?

The Organization for Economic Cooperation and Development (OECD) has established guidelines to eliminate tax havens.Why, then, can the OECD (as of 2004) still identify over 30 countries as tax havens?

Under U.S.tax law, what is the basis for the overall foreign tax credit limitation?

What is the main advantage of the American Jobs Creation Act of 2004 over the Tax Reform Act of 1986 relative to FTC baskets?

What causes double taxation?

Under the U.S.model tax treaty, which of the following statements is correct?

What is meant by the term "thin capitalization?"

Under the American Jobs Creation Act of 2004, how many FTC baskets are used to classify foreign source income?

An indirect foreign tax credit arises when:

The subsidiary of a U.S.corporation located in Country Y generated income of $1,000,000 on which it paid $200,000 in taxes to Country Y.The subsidiary paid a dividend to the U.S.parent of $150,000.How much tax is currently owed to the U.S.government if the federal tax rate is 35%?

Under U.S.tax laws, how are taxes paid by U.S.corporations to foreign governments treated?

Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC 2,500,000.Beako distributed the diamonds to its customers and received FC 4,000,000.If the national VAT is 20%, how much tax did Beako pay?

Which of the following is the most important type of Subpart F income?

What is the optimal tax objective for multinational corporations?

How might a parent company's home country eliminate double taxation on foreign source income?

What is a primary difference between the OECD and UN model tax treaties?

The nine categories of foreign source income defined by the Tax Reform Act of 1986 are referred to as:

To determine U.S.taxable income, foreign branch net income is grossed up by:

What is the U.S.policy concerning taxing income of a foreign branch of a U.S.corporation?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

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Exam 11: International Taxation

What is another name for the worldwide approach of tax jurisdiction?

In general, why do countries wish to avoid double taxation on corporations?

The Organization for Economic Cooperation and Development (OECD) has established guidelines to eliminate tax havens.Why, then, can the OECD (as of 2004) still identify over 30 countries as tax havens?

Under U.S.tax law, what is the basis for the overall foreign tax credit limitation?

What is the main advantage of the American Jobs Creation Act of 2004 over the Tax Reform Act of 1986 relative to FTC baskets?

What causes double taxation?

Under the U.S.model tax treaty, which of the following statements is correct?

What is meant by the term "thin capitalization?"

Under the American Jobs Creation Act of 2004, how many FTC baskets are used to classify foreign source income?

An indirect foreign tax credit arises when:

The subsidiary of a U.S.corporation located in Country Y generated income of $1,000,000 on which it paid $200,000 in taxes to Country Y.The subsidiary paid a dividend to the U.S.parent of $150,000.How much tax is currently owed to the U.S.government if the federal tax rate is 35%?

Under U.S.tax laws, how are taxes paid by U.S.corporations to foreign governments treated?

Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC 2,500,000.Beako distributed the diamonds to its customers and received FC 4,000,000.If the national VAT is 20%, how much tax did Beako pay?

Which of the following is the most important type of Subpart F income?

What is the optimal tax objective for multinational corporations?

How might a parent company's home country eliminate double taxation on foreign source income?

What is a primary difference between the OECD and UN model tax treaties?

The nine categories of foreign source income defined by the Tax Reform Act of 1986 are referred to as:

To determine U.S.taxable income, foreign branch net income is grossed up by:

What is the U.S.policy concerning taxing income of a foreign branch of a U.S.corporation?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters