Question 1

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 B

Question 2

Why might a developing country offer a tax holiday?

Accepted Answer

A)  To encourage job creation 
B)  To encourage foreign investment in the country 
C)  To stimulate foreign trade 
D)  All of the above 
A)  To encourage job creation 
B)  To encourage foreign investment in the country 
C)  To stimulate foreign trade 
D)  All of the above D

Question 3

Under U.S. tax law, what is the relationship between foreign tax credits and the different categories of foreign source income?

Accepted Answer

A)  FTC from one category can offset taxes owed on other categories. 
B)  Excess FTC from one category can be carried forward to offset future U.S. taxes payable on another category. 
C)  Excess FTC from one category can be carried back to offset U.S. taxes paid on another category in the prior year. 
D)  None of the above 
A)  FTC from one category can offset taxes owed on other categories. 
B)  Excess FTC from one category can be carried forward to offset future U.S. taxes payable on another category. 
C)  Excess FTC from one category can be carried back to offset U.S. taxes paid on another category in the prior year. 
D)  None of the above D

Question 4

How does the U.S. government tax controlled foreign corporations (CFC) differently from other subsidiaries?

Accepted Answer

A)  All income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received. 
B)  Some income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received. 
C)  None of the income generated by the CFC is subject to U.S. tax. 
D)  Only interest income from CFC is taxed in the year received by the U.S. government. 
A)  All income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received. 
B)  Some income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received. 
C)  None of the income generated by the CFC is subject to U.S. tax. 
D)  Only interest income from CFC is taxed in the year received by the U.S. government.

Question 5

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)  $0 
C)  $52,500 
D)  $32,500 
A)  $35,625 
B)  $0 
C)  $52,500 
D)  $32,500

Question 6

The income of a foreign subsidiary is not taxable until dividends are distributed to the U.S. parent unless:

Accepted Answer

A)  Subpart F income is present. 
B)  the income from subsidiary exceeds 10 million. 
C)  extraordinary gains and losses form a part of the income. 
D)  the subsidiary is situated in a China. 
A)  Subpart F income is present. 
B)  the income from subsidiary exceeds 10 million. 
C)  extraordinary gains and losses form a part of the income. 
D)  the subsidiary is situated in a China.

Question 7

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

Accepted Answer

A)  Branch 
B)  Mine 
C)  Storage facility 
D)  Construction site 
A)  Branch 
B)  Mine 
C)  Storage facility 
D)  Construction site

Question 8

There are two major taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

Accepted Answer

A)  Excise tax 
B)  Payroll tax 
C)  Withholding tax 
D)  Value-added tax 
A)  Excise tax 
B)  Payroll tax 
C)  Withholding tax 
D)  Value-added tax

Question 9

Jane, a citizen of Country X, received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

Accepted Answer

A)  Territorial approach 
B)  Worldwide approach 
C)  Legalistic approach 
D)  None of the above 
A)  Territorial approach 
B)  Worldwide approach 
C)  Legalistic approach 
D)  None of the above

Question 10

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.

Question 11

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

Accepted Answer

A)  the difference between the exchange rate at the beginning of the year and the exchange rate at the end of the year. 
B)  the difference between the exchange rate on the date of repatriation and the exchange rate used to translate the branch's pretax income. 
C)  the difference between the current exchange rate and the exchange rate at the end of the year. 
D)  the difference between the exchange rate on the date of repatriation and the exchange rate at the beginning of the year. 
A)  the difference between the exchange rate at the beginning of the year and the exchange rate at the end of the year. 
B)  the difference between the exchange rate on the date of repatriation and the exchange rate used to translate the branch's pretax income. 
C)  the difference between the current exchange rate and the exchange rate at the end of the year. 
D)  the difference between the exchange rate on the date of repatriation and the exchange rate at the beginning of the year.

Question 12

Because some countries have a lower withholding tax on interest than they do for dividends, multinational corporations may finance foreign operations with debt rather than equity. What additional reason may an MNC have for using this investment strategy?

Accepted Answer

A)  Interest is generally a deductible expense, whereas dividends paid are not. 
B)  Dividends require a cash outflow but interest does not. 
C)  Cash flows from dividends must be discounted using the cost of capital, which is not the case for interest. 
D)  All of the above 
A)  Interest is generally a deductible expense, whereas dividends paid are not. 
B)  Dividends require a cash outflow but interest does not. 
C)  Cash flows from dividends must be discounted using the cost of capital, which is not the case for interest. 
D)  All 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 on purchase from Aco Ltd.

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

A Japanese branch of a U.S. corporation paid $4,200,000 in taxes to the government of Japan on income it generated there. The corporation is subject to a 35% tax rate in the U.S. How much foreign tax credit can be taken in calculating the taxes owed to the U.S. on $10,000,000 of Japanese branch income?

Accepted Answer

A)  $4,200,000 
B)  $3,500,000 
C)  $0 
D)  $7,000,000 
A)  $4,200,000 
B)  $3,500,000 
C)  $0 
D)  $7,000,000

Question 15

What is the international norm for determining tax jurisdiction?

Accepted Answer

A)  Residence takes precedence over source 
B)  Citizenship takes precedence over residence 
C)  Source takes precedence over residence 
D)  Domestic takes precedence over foreign 
A)  Residence takes precedence over source 
B)  Citizenship takes precedence over residence 
C)  Source takes precedence over residence 
D)  Domestic takes precedence over foreign

Question 16

Which of the following is a benefit of tax treaties?

Accepted Answer

A)  They can be used to define tax jurisdiction. 
B)  They may be used to reduce withholding taxes. 
C)  They facilitate the exchange of information between countries. 
D)  All of the above 
A)  They can be used to define tax jurisdiction. 
B)  They may be used to reduce withholding taxes. 
C)  They facilitate the exchange of information between countries. 
D)  All of the above

Question 17

In following the international norm concerning tax jurisdiction, how would double taxation be eliminated?

Accepted Answer

A)  The subsidiary's home country would allow tax credits for taxes paid to the parent's home country. 
B)  The parent company's home country would allow tax credits for taxes paid to the subsidiary's home country. 
C)  The home countries of both the parent and the subsidiary would forego taxation on the income earned by the subsidiary. 
D)  None of the above 
A)  The subsidiary's home country would allow tax credits for taxes paid to the parent's home country. 
B)  The parent company's home country would allow tax credits for taxes paid to the subsidiary's home country. 
C)  The home countries of both the parent and the subsidiary would forego taxation on the income earned by the subsidiary. 
D)  None of the above

Question 18

What is a value added tax (VAT)?

Accepted Answer

A)  It is the European version of a sales tax, which is paid by the purchaser based on sales price. 
B)  Taxes used in lieu of sales tax and incorporated into the price of a product or service. 
C)  The tax paid by a foreign corporation on its fixed assets. 
D)  This is the name of the corporate income tax in Canada, Australia, and the United Kingdom. 
A)  It is the European version of a sales tax, which is paid by the purchaser based on sales price. 
B)  Taxes used in lieu of sales tax and incorporated into the price of a product or service. 
C)  The tax paid by a foreign corporation on its fixed assets. 
D)  This is the name of the corporate income tax in Canada, Australia, and the United Kingdom.

Question 19

Dividends received from companies in countries other than one's home country are classified as:

Accepted Answer

A)  operating income. 
B)  exempt income. 
C)  foreign source income. 
D)  taxable income. 
A)  operating income. 
B)  exempt income. 
C)  foreign source income. 
D)  taxable income.

Question 20

How do differences in the effective corporate tax rates between countries affect capital investment decisions?

Accepted Answer

A)  Taxes have a negative effect on cash flows from the investment. 
B)  Taxes determine the rate used in calculating the discounted cash flows. 
C)  Taxes affect the amount of depreciation that will be recorded on the investment. 
D)  All of the above 
A)  Taxes have a negative effect on cash flows from the investment. 
B)  Taxes determine the rate used in calculating the discounted cash flows. 
C)  Taxes affect the amount of depreciation that will be recorded on the investment. 
D)  All of the above

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

Why might a developing country offer a tax holiday?

Under U.S. tax law, what is the relationship between foreign tax credits and the different categories of foreign source income?

How does the U.S. government tax controlled foreign corporations (CFC) differently from other subsidiaries?

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%?

The income of a foreign subsidiary is not taxable until dividends are distributed to the U.S. parent unless:

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

There are two major taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

Jane, a citizen of Country X, received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

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

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

Because some countries have a lower withholding tax on interest than they do for dividends, multinational corporations may finance foreign operations with debt rather than equity. What additional reason may an MNC have for using this investment strategy?

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 on purchase from Aco Ltd.

What is the international norm for determining tax jurisdiction?

Which of the following is a benefit of tax treaties?

In following the international norm concerning tax jurisdiction, how would double taxation be eliminated?

What is a value added tax (VAT)?

Dividends received from companies in countries other than one's home country are classified as:

How do differences in the effective corporate tax rates between countries affect capital investment decisions?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

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Exam 8: International Taxation

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

Why might a developing country offer a tax holiday?

Under U.S. tax law, what is the relationship between foreign tax credits and the different categories of foreign source income?

How does the U.S. government tax controlled foreign corporations (CFC) differently from other subsidiaries?

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%?

The income of a foreign subsidiary is not taxable until dividends are distributed to the U.S. parent unless:

The definition of a "permanent establishment" is a key article of the OECD's model tax treaty. Which of the following would NOT be considered a permanent establishment by the OECD?

There are two major taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?

Jane, a citizen of Country X, received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane's dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

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

The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:

Because some countries have a lower withholding tax on interest than they do for dividends, multinational corporations may finance foreign operations with debt rather than equity. What additional reason may an MNC have for using this investment strategy?

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 on purchase from Aco Ltd.

What is the international norm for determining tax jurisdiction?

Which of the following is a benefit of tax treaties?

In following the international norm concerning tax jurisdiction, how would double taxation be eliminated?

What is a value added tax (VAT)?

Dividends received from companies in countries other than one's home country are classified as:

How do differences in the effective corporate tax rates between countries affect capital investment decisions?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

International Transfer Pricing

Management Accounting Issues in Multinational Corporations

Auditing and Corporate Governance: An International Perspective

International Sustainability Reporting

Filters