Question 1

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

Accepted Answer

A) Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S. dollars when used as a FTC on a U.S. return. 
B) Foreign taxes are translated into U.S. dollars only when such translation provides a tax benefit to the taxpayer. 
C) Translation of foreign taxes into U.S. dollars helps manage the U.S. balance of trade. 
D) Translation of foreign taxes into U.S. dollars encourages foreign corporations to set up operations in the United States. 
E) None of the above. 
A) Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S. dollars when used as a FTC on a U.S. return. 
B) Foreign taxes are translated into U.S. dollars only when such translation provides a tax benefit to the taxpayer. 
C) Translation of foreign taxes into U.S. dollars helps manage the U.S. balance of trade. 
D) Translation of foreign taxes into U.S. dollars encourages foreign corporations to set up operations in the United States. 
E) None of the above.

Question 2

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 3

Wallack,Inc.,a U.S.corporation,owns 100% of Orion,Ltd.,a foreign corporation.Orion earns only general limitation income.During the current year,Orion paid Wallack a $5,000 dividend. The § 902 credit associated with this dividend is $3,000.The foreign jurisdiction requires a withholding tax of 10%,so Wallack received only $4,500 in cash as a result of the dividend.What is Wallack's total U.S.gross income reported as a result of the $4,500 cash dividend received?

Accepted Answer

A) $0. 
B) $4,000. 
C) $4,500. 
D) $8,000. 
E) None of the above 
A) $0. 
B) $4,000. 
C) $4,500. 
D) $8,000. 
E) None of the above

Question 4

FLCo,a U.S.corporation,has $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.FLCo's U.S.and foreign assets are as follows.
 
How should FLCo allocate and apportion its interest expense between U.S.and foreign sources in order to maximize its FTC for the current year?

Accepted Answer

A) Using tax book values. 
B) Using fair market value. 
C) Using tax book value for U.S. source and fair market value for foreign source. 
D) Using fair market value for U.S.-source and tax book value for foreign source. 
E) None of the above. 
A) Using tax book values. 
B) Using fair market value. 
C) Using tax book value for U.S. source and fair market value for foreign source. 
D) Using fair market value for U.S.-source and tax book value for foreign source. 
E) None of the above.

Question 5

Income from international communications activities earned by a U.S.person is sourced 100% in the United States.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Accepted Answer

A) Purchase of inventory from a U.S. parent and sale to anyone inside the CFC country. 
B) Purchase of inventory from a U.S. parent and sale to anyone outside the CFC country. 
C) Purchase of inventory from a U.S. parent and sale to a related party outside the CFC country. 
D) Purchase of inventory from a U.S. parent and sale to a non-related party outside the CFC country. 
E) None of the above. 
A) Purchase of inventory from a U.S. parent and sale to anyone inside the CFC country. 
B) Purchase of inventory from a U.S. parent and sale to anyone outside the CFC country. 
C) Purchase of inventory from a U.S. parent and sale to a related party outside the CFC country. 
D) Purchase of inventory from a U.S. parent and sale to a non-related party outside the CFC country. 
E) None of the above.

Question 7

Match the definition with the correct term.
a.FDAP
b.FIRPTA
c.Effectively connected income
d.U.S. trade or business
e.Branch profits tax
f.Nonresident alien
-Income of foreign person taxed through filing of a U.S.tax return with deductions allowed against gross income.

Accepted Answer

The answer of Match the definition with the correct term.
a.FDAP
b.FIRPTA
c.Effectively...

Question 8

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) 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. 
C) 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. 
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 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) 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. 
C) 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. 
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 cases.

Question 9

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Accepted Answer

A) True 
 B)False

Question 10

A U.S.corporation owns 30% of a foreign corporation.The remaining 70% is owned by other foreign corporations not controlled by the U.S.corporation.The functional currency of the foreign corporation is the euro.The U.S.corporation receives a dividend equivalent to 50,000 euro.If the average exchange rate for the E & P to which the dividend is attributed is 1.2 euro: $1,the exchange rate at year end is .95 euro: $1 and on the date of the dividend payment is 1.1 euro: $1,what is the result to the U.S.corporation on receipt of the dividend?

Accepted Answer

A) The U.S. corporation receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000 euro/1.2)]. 
B) The U.S. corporation receives a dividend of $45,455 (50,000 euro/1.1) with no exchange gain or loss. 
C) The U.S. corporation receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) The U.S. corporation receives a dividend of $52,632 (50,000 euro/.95) with no exchange gain or loss. 
E) None of the above. 
A) The U.S. corporation receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000 euro/1.2)]. 
B) The U.S. corporation receives a dividend of $45,455 (50,000 euro/1.1) with no exchange gain or loss. 
C) The U.S. corporation receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) The U.S. corporation receives a dividend of $52,632 (50,000 euro/.95) with no exchange gain or loss. 
E) None of the above.

Question 11

Match the definition with the correct term.
a.Indirect credit
b.Direct credit
c.10 percent
d.50 percent
e.Section 78
f.Two
g.
Six
h.
Overall foreign loss
-Foreign tax credit allowed for income taxes paid by foreign corporation.

Accepted Answer

The answer of Match the definition with the correct term.
a.Indirect...

Question 12

Amelia,Inc.,a domestic corporation receives a $100,000 cash dividend from Starke,Ltd.,a § 902 noncontrolled foreign corporation (i.e.,Amelia owns at least 10% but Starke is not a CFC).Amelia owns 15% of Starke.Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to post-1986 E & P.What is the § 902 FTC allowed Amelia related to the Starke dividend?

Accepted Answer

A) $0. 
B) $50,000. 
C) $100,000. 
D) $200,000. 
E) None of the above. 
A) $0. 
B) $50,000. 
C) $100,000. 
D) $200,000. 
E) None of the above.

Question 13

The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Accepted Answer

A) True 
 B)False

Question 14

Match the definition with the correct term.
a.
Inbound
b.
Section 482
c.
Tax haven
d.
Qualified business unit
e.
Outbound
f.
Income tax treaty
g.
Allocation and apportionment
-Statutory rule related to transfer pricing.

Accepted Answer

The answer of Match the definition with the correct term.
a.
Inbound
b.
Section...

Question 15

Tax deferred reorganizations involving U.S.-owned foreign corporations may be currently taxable under certain circumstances.

Accepted Answer

A) True 
 B)False

Question 16

Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

Accepted Answer

A) True 
 B)False

Question 17

History,Inc.,a domestic corporation,owns 60% of the stock of Past,Inc.,a foreign corporation.For the current year,History receives a dividend of $50,000 from Past.Past's post-'86 E & P (after taxes)and foreign taxes are $4,000,000 and $300,000,respectively.What is History's total gross income from receipt of this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

Accepted Answer

Dividend income must be "gross

Question 18

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 82% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Accepted Answer

A) $100,000. 
B) $18,000. 
C) $0. 
D) $82,000. 
E) None of the above. 
A) $100,000. 
B) $18,000. 
C) $0. 
D) $82,000. 
E) None of the above.

Question 19

Match the definition with the correct term.
a.Indirect credit
b.Direct credit
c.10 percent
d.50 percent
e.Section 78
f.Two
g.
Six
h.
Overall foreign loss
-Number of foreign tax credit limitation baskets after 2006.

Accepted Answer

The answer of Match the definition with the correct term.
a.Indirect...

Question 20

Match the definition with the correct term.
a.Foreign base company income
b.Foreign personal holding company income
c.U.S. shareholder
d.Previously taxed income
e.De minimis rule
f.Passive foreign investment company
-Income that tends to lack any true economic connection to the country of a CFC's organization.

Accepted Answer

The answer of Match the definition with the correct term.
a.Foreign...

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

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Income from international communications activities earned by a U.S.person is sourced 100% in the United States.

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Income of foreign person taxed through filing of a U.S.tax return with deductions allowed against gross income.

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

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Foreign tax credit allowed for income taxes paid by foreign corporation.

The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -Statutory rule related to transfer pricing.

Tax deferred reorganizations involving U.S.-owned foreign corporations may be currently taxable under certain circumstances.

Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 82% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Number of foreign tax credit limitation baskets after 2006.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

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

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

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Income from international communications activities earned by a U.S.person is sourced 100% in the United States.

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Income of foreign person taxed through filing of a U.S.tax return with deductions allowed against gross income.

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

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Foreign tax credit allowed for income taxes paid by foreign corporation.

The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -Statutory rule related to transfer pricing.

Tax deferred reorganizations involving U.S.-owned foreign corporations may be currently taxable under certain circumstances.

Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 82% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Number of foreign tax credit limitation baskets after 2006.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

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