Question 1

A Qualified Business Unit of a U.S.corporation that operates in Germany generally uses the Euro as its functional currency.

Accepted Answer

A) True 
 B)False  True

Question 2

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Accepted Answer

A) Jen, Kathy, Leslie, David, Ben, and Mike are all U.S.citizens. 
B) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.David is married to Kathy.Mike is a foreign resident and citizen. 
C) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Ben is Mike's son.Mike is a foreign resident and citizen. 
D) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Mike is a foreign resident and citizen. 
A) Jen, Kathy, Leslie, David, Ben, and Mike are all U.S.citizens. 
B) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.David is married to Kathy.Mike is a foreign resident and citizen. 
C) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Ben is Mike's son.Mike is a foreign resident and citizen. 
D) Jen, Kathy, Leslie, David, and Ben are all U.S.citizens.Mike is a foreign resident and citizen. A

Question 3

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent, followed by:

Accepted Answer

A) Sale to anyone outside Fredonia. 
B) Sale to anyone inside Fredonia. 
C) Sale to a related party outside Fredonia. 
D) Sale to a non-related party outside Fredonia. 
A) Sale to anyone outside Fredonia. 
B) Sale to anyone inside Fredonia. 
C) Sale to a related party outside Fredonia. 
D) Sale to a non-related party outside Fredonia. B

Question 4

Losses and deductions, similar to income items, can be U.S.- or foreign-source.

Accepted Answer

A) True 
 B)False

Question 5

BrazilCo, Inc., a foreign corporation with a U.S.trade or business, has U.S.-source income as follows.
   Determine BrazilCo's total U.S.tax liability for the year, assuming a 35% corporate rate and no tax treaty.BrazilCo leaves its U.S.branch profits invested in the United States and does not otherwise repatriate any of its U.S.assets during the year.

Accepted Answer

BrazilCo's U.S.tax l

Question 6

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 7

Dark, Inc., a U.S.corporation, operates Dunkel, an unincorporated branch manufacturing operation in Germany.Dark reports $100,000 of taxable income from Dunkel on its U.S.tax return, along with $400,000 of taxable income from its U.S.operations.Dark paid $40,000 in German income taxes related to the $100,000 of Dunkel income. Assuming a U.S.tax rate of 35%, what is Dark's U.S.tax liability after any allowable foreign tax credits?

Accepted Answer

A) $35,000. 
B) $135,000. 
C) $140,000. 
D) $175,000. 
A) $35,000. 
B) $135,000. 
C) $140,000. 
D) $175,000.

Question 8

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) $8,000. 
B) $5,000. 
C) $4,500. 
D) $3,000. 
A) $8,000. 
B) $5,000. 
C) $4,500. 
D) $3,000.

Question 11

Generally, accrued foreign income taxes are translated at the:

Accepted Answer

A) Exchange rate when the taxes are paid. 
B) Exchange rate on the date when the taxes are accrued. 
C) Average exchange rate for the tax year to which the taxes relate. 
D) Average exchange rate for the last five tax years. 
A) Exchange rate when the taxes are paid. 
B) Exchange rate on the date when the taxes are accrued. 
C) Average exchange rate for the tax year to which the taxes relate. 
D) Average exchange rate for the last five tax years.

Question 12

Which of the following statements regarding the sourcing of dividend income is true?

Accepted Answer

A) Dividends are sourced based on the residence of the recipient. 
B) Dividends from a U.S.corporation are U.S.source, without regard to whether the U.S.corporation is an 80-20 company. 
C) Dividends from a U.S.corporation are foreign-source, if the U.S.corporation is an 80-20 company. 
D) Dividends from a U.S.corporation are foreign-source based on the percentage of foreign-source income earned by the U.S.payor. 
A) Dividends are sourced based on the residence of the recipient. 
B) Dividends from a U.S.corporation are U.S.source, without regard to whether the U.S.corporation is an 80-20 company. 
C) Dividends from a U.S.corporation are foreign-source, if the U.S.corporation is an 80-20 company. 
D) Dividends from a U.S.corporation are foreign-source based on the percentage of foreign-source income earned by the U.S.payor.

Question 13

Which of the following statements regarding income sourcing is not correct?

Accepted Answer

A) U.S.persons benefit from earning low-tax foreign-source income. 
B) Foreign persons generally benefit from avoiding U.S.-source income classification. 
C) U.S.persons are not concerned with source of income because all their income is subject to U.S.tax under a worldwide system. 
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States. 
A) U.S.persons benefit from earning low-tax foreign-source income. 
B) Foreign persons generally benefit from avoiding U.S.-source income classification. 
C) U.S.persons are not concerned with source of income because all their income is subject to U.S.tax under a worldwide system. 
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States.

Question 14

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

Accepted Answer

A) True 
 B)False

Question 15

GreenCo, a domestic corporation, earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Accepted Answer

A) $30 million. 
B) $25 million. 
C) $30 million less any tax paid on U.S.income. 
D) $25 million less any tax paid on the foreign income. 
A) $30 million. 
B) $25 million. 
C) $30 million less any tax paid on U.S.income. 
D) $25 million less any tax paid on the foreign income.

Question 16

Which of the following statements regarding the U.S.taxation of foreign persons is true?

Accepted Answer

A) Foreign persons never are subject to U.S.income tax. 
B) Foreign persons are subject to U.S.income tax only on gains from U.S.real property. 
C) Foreign persons are subject to a withholding tax on foreign-source portfolio income. 
D) Foreign persons are subject to a withholding tax on U.S.-source portfolio income. 
A) Foreign persons never are subject to U.S.income tax. 
B) Foreign persons are subject to U.S.income tax only on gains from U.S.real property. 
C) Foreign persons are subject to a withholding tax on foreign-source portfolio income. 
D) Foreign persons are subject to a withholding tax on U.S.-source portfolio income.

Question 17

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Accepted Answer

A) The Subpart F income provisions provide certainty as to the U.S.income tax treatment of cross-border transactions. 
B) The Subpart F income provisions allow deferral of foreign-source income from U.S.taxation. 
C) The Subpart F income provisions prevent shifting of income from the United States to low-tax foreign jurisdictions. 
D) The Subpart F income provisions prevent shifting of income from the United States to high-tax foreign jurisdictions. 
A) The Subpart F income provisions provide certainty as to the U.S.income tax treatment of cross-border transactions. 
B) The Subpart F income provisions allow deferral of foreign-source income from U.S.taxation. 
C) The Subpart F income provisions prevent shifting of income from the United States to low-tax foreign jurisdictions. 
D) The Subpart F income provisions prevent shifting of income from the United States to high-tax foreign jurisdictions.

Question 18

Yvonne is a citizen of France 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.   Is Yvonne treated as a U.S.resident for the current year?

Accepted Answer

A) No, because Yvonne is a citizen of France. 
B) No, because Yvonne was not present in the United States at least 183 days during the current year. 
C) No, because although Yvonne 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. 
D) Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years (using the appropriate fractions for the prior years). 
A) No, because Yvonne is a citizen of France. 
B) No, because Yvonne was not present in the United States at least 183 days during the current year. 
C) No, because although Yvonne 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. 
D) Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years (using the appropriate fractions for the prior years).

Question 19

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Accepted Answer

A) Itemized deductions. 
B) Foreign tax credit. 
C) Calculation of a U.S.person's total taxable income. 
D) Calculation of a U.S.person's deductible interest expense. 
A) Itemized deductions. 
B) Foreign tax credit. 
C) Calculation of a U.S.person's total taxable income. 
D) Calculation of a U.S.person's deductible interest expense.

Question 20

Section 482 is used by the Treasury to:

Accepted Answer

A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income, deductions, etc., to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S.corporations with non-U.S.owners. 
D) All of the above. 
E) None of the above. 
A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income, deductions, etc., to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S.corporations with non-U.S.owners. 
D) All of the above. 
E) None of the above.

Exam 25: Taxation of International Transactions

A Qualified Business Unit of a U.S.corporation that operates in Germany generally uses the Euro as its functional currency.

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Which of the following income items does not represent Subpart F income if it is earned by a controlled foreign corporation in Fredonia? Purchase of inventory from the U.S.parent, followed by:

Losses and deductions, similar to income items, can be U.S.- or foreign-source.

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.

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

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.

Generally, accrued foreign income taxes are translated at the:

Which of the following statements regarding the sourcing of dividend income is true?

Which of the following statements regarding income sourcing is not correct?

Nico lives in California. She was born in Peru but holds a green card. Nico is a nonresident alien (NRA).

GreenCo, a domestic corporation, earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Which of the following statements regarding the U.S.taxation of foreign persons is true?

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Yvonne is a citizen of France 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. Is Yvonne treated as a U.S.resident for the current year?

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Section 482 is used by the Treasury to:

An Introduction to Taxation and Understanding the Federal 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

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, 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

Income Taxation of Trusts and Estates

Filters