Question 1

The United States has in force income tax treaties with about 70 countries.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

Accepted Answer

A) Nondiscrimination tax. 
B) Windfall U.S.profits tax. 
C) Dividend repatriation tax. 
D) Branch profits tax. 
A) Nondiscrimination tax. 
B) Windfall U.S.profits tax. 
C) Dividend repatriation tax. 
D) Branch profits tax.

Question 3

Krebs, Inc., a U.S.corporation, operates an unincorporated branch manufacturing operation in the U.K.Krebs, Inc., reports $900,000 of taxable income from the U.K.branch on its U.S.tax return, along with $1,600,000 of taxable income from its U.S.operations.The U.K.branch income is all general limitation basket income.Krebs paid $270,000 in U.K.income taxes related to the $900,000 in branch income. Assuming a U.S.tax rate of 35%, what is Krebs' U.S.tax liability after any allowable foreign tax credits?

Accepted Answer

A) $0. 
B) $270,000. 
C) $605,000. 
D) $875,000. 
A) $0. 
B) $270,000. 
C) $605,000. 
D) $875,000.

Question 4

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 5

U.S.income tax treaties:

Accepted Answer

A) Provide rules by which multinational taxpayers avoid double taxation. 
B) Provide for taxation exclusively by the source country. 
C) Provide that the country with the highest tax rate will be allowed exclusive tax collection. 
D) Provide for taxation exclusively by the country of residence. 
A) Provide rules by which multinational taxpayers avoid double taxation. 
B) Provide for taxation exclusively by the source country. 
C) Provide that the country with the highest tax rate will be allowed exclusive tax collection. 
D) Provide for taxation exclusively by the country of residence.

Question 6

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 7

Match the definition with the correct term.Not all of the terms have a match. A definition can be used more than once.

Accepted Answer

The answer of Match the definition with the correct term.Not...

Question 8

Goolsbee, Inc., a domestic corporation, generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value) are as follows.
   Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value, apportion interest expense to foreign-source income.

Accepted Answer

Using the asset method and the

Question 9

The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates.

Accepted Answer

A) FIRPTA gains. 
B) Capital gains effectively connected with a U.S.trade or business. 
C) Net long-term capital gains, where no U.S.trade or business exists. 
D) Fixed, determinable, annual or periodic (FDAP) income effectively connected with a U.S.trade or business. 
A) FIRPTA gains. 
B) Capital gains effectively connected with a U.S.trade or business. 
C) Net long-term capital gains, where no U.S.trade or business exists. 
D) Fixed, determinable, annual or periodic (FDAP) income effectively connected with a U.S.trade or business.

Question 10

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

Accepted Answer

A) Calculation of a U.S.person's total taxable income. 
B) Calculation of U.S.withholding tax on the FDAP income of foreign persons. 
C) Calculation of the foreign earned income exclusion. 
D) Calculation of a foreign person's income effectively connected with carrying on a U.S.trade or business. 
A) Calculation of a U.S.person's total taxable income. 
B) Calculation of U.S.withholding tax on the FDAP income of foreign persons. 
C) Calculation of the foreign earned income exclusion. 
D) Calculation of a foreign person's income effectively connected with carrying on a U.S.trade or business.

Question 11

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

Accepted Answer

A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source. 
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source. 
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business. 
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax. 
A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source. 
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source. 
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business. 
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax.

Question 12

OutCo, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year.OutCo's current year E & P is $250,000 and its accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

Accepted Answer

A) $250,000. 
B) $650,000. 
C) $900,000. 
D) $18 million. 
A) $250,000. 
B) $650,000. 
C) $900,000. 
D) $18 million.

Question 13

USCo, a domestic corporation, reports worldwide taxable income of $500,000, including a $100,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $1 million and it has paid $200,000 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) $500,000. 
B) $200,000. 
C) $100,000. 
D) $20,000. 
A) $500,000. 
B) $200,000. 
C) $100,000. 
D) $20,000.

Question 14

ForCo, a foreign corporation not engaged in a U.S.trade or business, recognizes a $3 million gain from the sale of land located in the United States.The amount realized on the sale was $50 million.Absent any exceptions, what is the required withholding amount on the part of the purchaser of this land?

Accepted Answer

A) $0. 
B) $300,000. 
C) $3 million. 
D) $5 million. 
A) $0. 
B) $300,000. 
C) $3 million. 
D) $5 million.

Question 15

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 16

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach, because only income earned within the U.S.border is subject to taxation.

Accepted Answer

A) True 
 B)False

Question 17

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Which of the following is not 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 20

Shannon, a foreign person with a green card, spends the following days in the United States.   Shannon's residency status for 2014 is:

Accepted Answer

A) U.S.resident because she has a green card. 
B) U.S.resident since she was a U.S.resident for the past immediately preceding two years. 
C) Not a U.S.resident because Shannon was not in the United states for at least 31 days during 2014. 
D) Not a U.S.resident since, using the three-year test, Shannon is not present in the United states for at least 183 days. 
A) U.S.resident because she has a green card. 
B) U.S.resident since she was a U.S.resident for the past immediately preceding two years. 
C) Not a U.S.resident because Shannon was not in the United states for at least 31 days during 2014. 
D) Not a U.S.resident since, using the three-year test, Shannon is not present in the United states for at least 183 days.

Exam 25: Taxation of International Transactions

The United States has in force income tax treaties with about 70 countries.

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

U.S.income tax treaties:

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

Match the definition with the correct term.Not all of the terms have a match. A definition can be used more than once.

Goolsbee, Inc., a domestic corporation, generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value) are as follows. Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value, apportion interest expense to foreign-source income.

The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates.

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

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

OutCo, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year.OutCo's current year E & P is $250,000 and its accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

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

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach, because only income earned within the U.S.border is subject to taxation.

A U.S.taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Which of the following is not a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Shannon, a foreign person with a green card, spends the following days in the United States. Shannon's residency status for 2014 is:

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