Question 1

The foreign tax credit method followed by the United States is

Accepted Answer

A) to grant the parent firm credit against its U.S.tax liability for taxes paid to foreign tax authorities on foreign-source income. 
B) in place for the purpose of avoiding double taxation. 
C) both a and b 
D) none of the above 
A) to grant the parent firm credit against its U.S.tax liability for taxes paid to foreign tax authorities on foreign-source income. 
B) in place for the purpose of avoiding double taxation. 
C) both a and b 
D) none of the above

Question 2

A controlled foreign corporation (CFC)is

Accepted Answer

A) a foreign corporation established as an affiliate of a U.S.corporation for the purpose of "buying" from the U.S.corporation property for resale and use abroad. 
B) a foreign subsidiary that has more than 50 percent of its voting equity owned by U.S.shareholders. 
C) a separate domestic U.S.corporation actively engaged in business in a U.S.possession (Puerto Rico and the U.S.Virgin Islands). 
D) one that has no "overall limitation" as regards to its foreign tax credits. 
A) a foreign corporation established as an affiliate of a U.S.corporation for the purpose of "buying" from the U.S.corporation property for resale and use abroad. 
B) a foreign subsidiary that has more than 50 percent of its voting equity owned by U.S.shareholders. 
C) a separate domestic U.S.corporation actively engaged in business in a U.S.possession (Puerto Rico and the U.S.Virgin Islands). 
D) one that has no "overall limitation" as regards to its foreign tax credits.

Question 3

Affiliates of foreign MNCs are taxed on the income earned in the source country under

Accepted Answer

A) the territorial method of declaring a national tax jurisdiction. 
B) the source method of declaring a tax jurisdiction. 
C) all of the above 
D) none of the above 
A) the territorial method of declaring a national tax jurisdiction. 
B) the source method of declaring a tax jurisdiction. 
C) all of the above 
D) none of the above

Question 4

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

Accepted Answer

A) 10 
B) 20 
C) 30 
D) 40 
E) 50 
A) 10 
B) 20 
C) 30 
D) 40 
E) 50

Question 5

A foreign subsidiary is

Accepted Answer

A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent of the voting equity stock. 
C) either a minority foreign subsidiary (an uncontrolled foreign corporation) or a controlled foreign corporation. 
D) both b and c 
A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent of the voting equity stock. 
C) either a minority foreign subsidiary (an uncontrolled foreign corporation) or a controlled foreign corporation. 
D) both b and c

Question 6

Many economists prefer a VAT to an income tax because

Accepted Answer

A) these economists are pin heads with no real world experience. 
B) an income tax provides a disincentive to work, whereas a VAT is a disincentive to unnecessary consumption. 
C) an income tax is an incentive to work, whereas a VAT is a disincentive to consumption. 
D) all of the above 
A) these economists are pin heads with no real world experience. 
B) an income tax provides a disincentive to work, whereas a VAT is a disincentive to unnecessary consumption. 
C) an income tax is an incentive to work, whereas a VAT is a disincentive to consumption. 
D) all of the above

Question 7

The undistributed income of a minority foreign subsidiary of a U.S.MNC

Accepted Answer

A) is tax deferred until it is remitted via a dividend. 
B) is taxed as imputed income. 
C) is withheld under subpart U income restrictions. 
D) none of the above 
A) is tax deferred until it is remitted via a dividend. 
B) is taxed as imputed income. 
C) is withheld under subpart U income restrictions. 
D) none of the above

Question 8

The idea that taxable income is taxed in the same manner by the taxpayer's national tax authority regardless of where in the world it is earned is referred to as

Accepted Answer

A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above 
A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above

Question 9

The underlying principle of tax equity is that

Accepted Answer

A) all similarly situated taxpayers should participate in the cost of operating the government according to the same rules. 
B) all similarly situated taxpayers should participate in the cost of operating the government on an equal basis. 
C) none of the above 
A) all similarly situated taxpayers should participate in the cost of operating the government according to the same rules. 
B) all similarly situated taxpayers should participate in the cost of operating the government on an equal basis. 
C) none of the above

Question 10

A withholding tax is defined by your textbook as

Accepted Answer

A) the money that the government takes for every worker's paycheck. 
B) social security taxes. 
C) a tax levied on income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
D) a tax levied on passive income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
A) the money that the government takes for every worker's paycheck. 
B) social security taxes. 
C) a tax levied on income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
D) a tax levied on passive income earned by an individual (or corporation) of one country within the tax jurisdiction of another county.

Question 11

In a given year,the U.S.IRS places an overall limitation applied to foreign tax credits.

Accepted Answer

A) The overall limitation is limited to the amount of tax due on the foreign-source income. 
B) The overall limitation is limited to the amount of tax actually paid during the tax year on the foreign-source income. 
C) The overall limitation is limited to the amount of tax that would have been due on the foreign-source income if it had been earned in the United States. 
D) None of the above 
A) The overall limitation is limited to the amount of tax due on the foreign-source income. 
B) The overall limitation is limited to the amount of tax actually paid during the tax year on the foreign-source income. 
C) The overall limitation is limited to the amount of tax that would have been due on the foreign-source income if it had been earned in the United States. 
D) None of the above

Question 12

Assume that a product has the following three stages of production: $$\begin{array}{l}
\text { Production Selling }\
\begin{array} { c c } 
\text { Stage } & \text { Price } \
\hline 1 & € 100 \
2 & € 250 \
3 & € 750
\end{array}
\end{array}$$ If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Accepted Answer

A) €110 
B) €120 
C) €150 
D) €225 
A) €110 
B) €120 
C) €150 
D) €225

Question 13

An uncontrolled foreign corporation is

Accepted Answer

A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 51 percent of the voting equity stock. 
C) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent but less than 50 percent of the voting equity stock. 
D) b and c 
A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 51 percent of the voting equity stock. 
C) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent but less than 50 percent of the voting equity stock. 
D) b and c

Question 14

Capital export neutrality

Accepted Answer

A) is a goal based on worldwide economic efficiency. 
B) is an example of Mercantilism. 
C) is based on host country economic efficiency. 
D) is based on MNC home country economic efficiency. 
A) is a goal based on worldwide economic efficiency. 
B) is an example of Mercantilism. 
C) is based on host country economic efficiency. 
D) is based on MNC home country economic efficiency.

Question 15

The current U.S.marginal tax rate for domestic nonfinancial corporations is 35 percent.

Accepted Answer

A) This is positioned pretty well in the middle of the rates assessed by the majority of countries, as reported in the PriceWaterhousCoopers annual Corporate Taxes: Worldwide summaries. 
B) Is positioned toward the upper end of the rates assessed by the majority of countries. 
C) But this is reduced on a dollar-for-dollar basis for any and all taxes paid to foreign governments, so this is an upper limit for the tax rate faced by U.S.MNCs. 
D) All of the above 
A) This is positioned pretty well in the middle of the rates assessed by the majority of countries, as reported in the PriceWaterhousCoopers annual Corporate Taxes: Worldwide summaries. 
B) Is positioned toward the upper end of the rates assessed by the majority of countries. 
C) But this is reduced on a dollar-for-dollar basis for any and all taxes paid to foreign governments, so this is an upper limit for the tax rate faced by U.S.MNCs. 
D) All of the above

Question 16

These days the benefits of "tax haven" subsidiaries have been reduced by

Accepted Answer

A) the present corporate income tax rate in the United States is not especially high in comparison to most non-tax haven countries. 
B) the rules governing controlled foreign corporations have effectively eliminated the ability to defer passive income in a tax haven subsidiary. 
C) all of the above 
D) none of the above 
A) the present corporate income tax rate in the United States is not especially high in comparison to most non-tax haven countries. 
B) the rules governing controlled foreign corporations have effectively eliminated the ability to defer passive income in a tax haven subsidiary. 
C) all of the above 
D) none of the above

Question 17

The worldwide method of declaring a national tax jurisdiction

Accepted Answer

A) is to tax national residents of the country on their worldwide income no matter in which country it is earned. 
B) is to tax all income earned within the country by any taxpayer, domestic or foreign. 
C) is to tax national residents of the country on their domestic income but not foreign-earned income. 
D) none of the above 
A) is to tax national residents of the country on their worldwide income no matter in which country it is earned. 
B) is to tax all income earned within the country by any taxpayer, domestic or foreign. 
C) is to tax national residents of the country on their domestic income but not foreign-earned income. 
D) none of the above

Question 18

Suppose a U.S.-based MNC makes bicycles with parts from its subsidiary in a low-tax East Asian country.The bicycle frames are made here,the component parts (cranksets,wheels,and so on)are made abroad,the bicycles are assembled in Japan and reimported to the U.S.It can reduce its reported U.S.income-and increase its subsidiary's profits-by

Accepted Answer

A) overcharging its subsidiaries for the U.S.-made frames. 
B) undercharging its subsidiaries for the U.S.-made frames. 
C) assembling the bicycles in the U.S. 
D) none of the above 
A) overcharging its subsidiaries for the U.S.-made frames. 
B) undercharging its subsidiaries for the U.S.-made frames. 
C) assembling the bicycles in the U.S. 
D) none of the above

Question 19

A transfer price

Accepted Answer

A) is the price that one division of a firm charges to another division of a firm. 
B) is an accounting issue, not a finance issue. 
C) does not involve actual cash flows, therefore does not impact the share price. 
D) none of the above 
A) is the price that one division of a firm charges to another division of a firm. 
B) is an accounting issue, not a finance issue. 
C) does not involve actual cash flows, therefore does not impact the share price. 
D) none of the above

Question 20

The criteria of tax neutrality: capital export neutrality,capital import neutrality and national neutrality

Accepted Answer

A) all consistent with one another. 
B) are not always consistent with one another. 
A) all consistent with one another. 
B) are not always consistent with one another.

The foreign tax credit method followed by the United States is

A controlled foreign corporation (CFC)is

Affiliates of foreign MNCs are taxed on the income earned in the source country under

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

A foreign subsidiary is

Many economists prefer a VAT to an income tax because

The undistributed income of a minority foreign subsidiary of a U.S.MNC

The idea that taxable income is taxed in the same manner by the taxpayer's national tax authority regardless of where in the world it is earned is referred to as

The underlying principle of tax equity is that

A withholding tax is defined by your textbook as

In a given year,the U.S.IRS places an overall limitation applied to foreign tax credits.

Assume that a product has the following three stages of production: Production Selling Stage Price 1 100 2 250 3 750 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

An uncontrolled foreign corporation is

Capital export neutrality

The current U.S.marginal tax rate for domestic nonfinancial corporations is 35 percent.

These days the benefits of "tax haven" subsidiaries have been reduced by

The worldwide method of declaring a national tax jurisdiction

A transfer price

The criteria of tax neutrality: capital export neutrality,capital import neutrality and national neutrality

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

Filters

Exam 21: International Tax Environment and Transfer Pricing

The foreign tax credit method followed by the United States is

A controlled foreign corporation (CFC)is

Affiliates of foreign MNCs are taxed on the income earned in the source country under

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

A foreign subsidiary is

Many economists prefer a VAT to an income tax because

The undistributed income of a minority foreign subsidiary of a U.S.MNC

The idea that taxable income is taxed in the same manner by the taxpayer's national tax authority regardless of where in the world it is earned is referred to as

The underlying principle of tax equity is that

A withholding tax is defined by your textbook as

In a given year,the U.S.IRS places an overall limitation applied to foreign tax credits.

Assume that a product has the following three stages of production: Production Selling Stage Price 1 100 2 250 3 750 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

An uncontrolled foreign corporation is

Capital export neutrality

The current U.S.marginal tax rate for domestic nonfinancial corporations is 35 percent.

These days the benefits of "tax haven" subsidiaries have been reduced by

The worldwide method of declaring a national tax jurisdiction

A transfer price

The criteria of tax neutrality: capital export neutrality,capital import neutrality and national neutrality

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

Filters