Question 1

Dividends received from a domestic corporation are totally U.S.source:

Accepted Answer

A) If the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business. 
B) If the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business. 
C) Unless the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business. 
D) Unless the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business. 
E) In all of the above cases. 
A) If the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business. 
B) If the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business. 
C) Unless the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business. 
D) Unless the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business. 
E) In all of the above cases.

Question 2

Jilt,a non-U.S.corporation,not resident in a treaty country,operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year.The branch increases its investments in U.S.property (its U.S.net equity) by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

Accepted Answer

A) $720,000. 
B) $1,200,000. 
C) $2,153,846. 
D) $2,873,846. 
A) $720,000. 
B) $1,200,000. 
C) $2,153,846. 
D) $2,873,846.

Question 3

Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation and apportionment
d.Qualified business unit
e.Tax haven
f.Income tax treaty
g.Section 482
-Foreign taxpayers earning income inside the United States.

Accepted Answer

The answer of Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation...

Question 4

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Accepted Answer

A) Intangibles income. 
B) Passive income. 
C) Business income. 
D) None of the above are separate FTC limitation baskets. 
E) All of the above are separate FTC limitation baskets. 
A) Intangibles income. 
B) Passive income. 
C) Business income. 
D) None of the above are separate FTC limitation baskets. 
E) All of the above are separate FTC limitation baskets.

Question 5

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 6

Waltz,Inc. ,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

Accepted Answer

A) Non-U.S.persons may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S.trade or business. 
B) Non-U.S.persons are subject to U.S.income or withholding tax only if they are engaged in a U.S.trade or business. 
C) Non-U.S.persons are not taxed on gains from U.S.real property as long as such property is not used in a U.S.trade or business. 
D) Once a non-U.S.person is engaged in a U.S.trade or business,the non-U.S.person's worldwide income is subject to U.S.taxation. 
A) Non-U.S.persons may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S.trade or business. 
B) Non-U.S.persons are subject to U.S.income or withholding tax only if they are engaged in a U.S.trade or business. 
C) Non-U.S.persons are not taxed on gains from U.S.real property as long as such property is not used in a U.S.trade or business. 
D) Once a non-U.S.person is engaged in a U.S.trade or business,the non-U.S.person's worldwide income is subject to U.S.taxation.

Question 8

Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation and apportionment
d.Qualified business unit
e.Tax haven
f.Income tax treaty
g.Section 482
-A country with very low or no income tax.

Accepted Answer

The answer of Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation...

Question 9

Fulton,Ltd. ,a foreign corporation,operates a U.S.branch that reports effectively connected U.S.earnings and profits (after income taxes) of $800,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $2 million and at the end of the tax year is $1.5 million.Fulton is organized in a nontreaty country.Fulton's dividend equivalent amount for the year is:

Accepted Answer

A) $1,300,000. 
B) $800,000. 
C) $500,000. 
D) $300,000. 
A) $1,300,000. 
B) $800,000. 
C) $500,000. 
D) $300,000.

Question 10

ForCo,a non-U.S.corporation based in Aldonza,purchases widgets from USCo,Inc. ,its U.S.parent corporation.The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza.The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 11

USCo,a U.S.corporation,reports worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Accepted Answer

A) $200,000 
B) $300,000 
C) $10 million 
D) $15 million 
A) $200,000 
B) $300,000 
C) $10 million 
D) $15 million

Question 12

Which of the following statements regarding the translation of foreign income taxes is true?

Accepted Answer

A) Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade. 
B) Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer. 
C) Foreign taxes typically are paid in a foreign currency and,thus,must be converted to U.S.dollars when used as a FTC on a U.S.return. 
D) Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States. 
A) Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade. 
B) Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer. 
C) Foreign taxes typically are paid in a foreign currency and,thus,must be converted to U.S.dollars when used as a FTC on a U.S.return. 
D) Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States.

Question 13

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 14

Performance,Inc. ,a U.S.corporation,owns 100% of Krumb,Ltd. ,a foreign corporation.Krumb earns only general basket income.During the current year,Krumb paid Performance a $200,000 dividend.The foreign tax credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%,so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash received?

Accepted Answer

A) $30,000 
B) $140,000 
C) $200,000 
D) $230,000 
A) $30,000 
B) $140,000 
C) $200,000 
D) $230,000

Question 15

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

Accepted Answer

A) True 
 B)False

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

An advance pricing agreement (APA) is used between:

Accepted Answer

A) Two or more governments. 
B) Two related taxpayers. 
C) The taxpayer and the IRS. 
D) The IRS and U.S.taxing authorities. 
A) Two or more governments. 
B) Two related taxpayers. 
C) The taxpayer and the IRS. 
D) The IRS and U.S.taxing authorities.

Question 18

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 19

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 20

Given the following information,determine whether Greta,an alien,is a U.S.resident for Year 3.Greta cannot establish a tax home in or a closer connection to a foreign country. Year Number of days in the United States 3 120 2 150 1 240

Accepted Answer

In general,for Federal income tax purpos

Exam 25: Taxation of International Transactions

Dividends received from a domestic corporation are totally U.S.source:

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Foreign taxpayers earning income inside the United States.

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Waltz,Inc. ,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

Which of the following statements regarding a non-U.S.person's U.S.tax consequences is true?

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -A country with very low or no income tax.

ForCo,a non-U.S.corporation based in Aldonza,purchases widgets from USCo,Inc. ,its U.S.parent corporation.The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza.The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Which of the following statements regarding the translation of foreign income taxes is true?

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

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

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.

An advance pricing agreement (APA) is used between:

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?

Given the following information,determine whether Greta,an alien,is a U.S.resident for Year 3.Greta cannot establish a tax home in or a closer connection to a foreign country. Year Number of days in the United States 3 120 2 150 1 240

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters