Question 1

Subpart F income includes portfolio income like dividends and interest.

Accepted Answer

A) True 
 B)False

Question 2

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 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

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 5

With respect to income generated by non­U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

Accepted Answer

The answer is "both." U.S. persons are s

Question 6

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.­source?

Accepted Answer

A)  $0 
B)  $10,500 
C)  $39,500 
D)  $50,000 
A)  $0 
B)  $10,500 
C)  $39,500 
D)  $50,000

Question 7

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 8

Ownership percentage required before a deemed paid foreign tax credit is allowed.

Accepted Answer

e
Match the definition with th

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

Columbia, Inc., a U.S. corporation, receives a $150,000 cash dividend from Starke, Ltd. Columbia owns 15% of Starke. Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P. What is Columbia's gross income related to the Starke dividend?

Accepted Answer

A)  $206,250 
B)  $150,000 
C)  $56,250 
D)  $22,500 
A)  $206,250 
B)  $150,000 
C)  $56,250 
D)  $22,500

Question 11

Given the following information, determine if FanCo, a foreign corporation, is a CFC.
Shareholders of Voting
foreign corporation power Classification
Murray 24% U.S. person
Nancy 20% U.S. person
Otto 40% Foreign person
Patricia 16% U.S. person
Patricia is Murray's daughter.

Accepted Answer

Voting power Voting power Total
Sharehol

Question 12

Which of the following determinations does not require knowing the amounts of one's U.S.­ versus foreign­source 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 13

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Accepted Answer

A)  100% U.S. source. 
B)  100% foreign source. 
C)  50% U.S. source and 50% foreign source. 
D)  50% foreign source and 50% sourced based on location of manufacturing assets. 
A)  100% U.S. source. 
B)  100% foreign source. 
C)  50% U.S. source and 50% foreign source. 
D)  50% foreign source and 50% sourced based on location of manufacturing assets.

Question 14

Arendt, Inc., a U.S. corporation, purchases a piece of equipment for use in its manufacture of custom pianos. The equipment is acquired in Ireland at a cost of 200,000 euros when 1 euro: $1.35. Payment is due in 90 days. Arendt acquires 200,000 euros and pays for the machine when 1 euro: $1.15. What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?

Accepted Answer

No foreign currency exchange gain or los

Question 15

Which of the following statements is false in regard to the U.S. income tax treaty program?

Accepted Answer

A)  There are about 70 bilateral income tax treaties between the U.S. and other countries. 
B)  Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income. 
C)  U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language. 
D)  None of the above statements is false. 
A)  There are about 70 bilateral income tax treaties between the U.S. and other countries. 
B)  Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income. 
C)  U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language. 
D)  None of the above statements is false.

Question 16

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

Accepted Answer

A)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because she is in the U.S. for 90 days or less. 
B)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because the amount paid to her is less than $3,000. 
C)  Chang has $2,500 U.S.-source income, because her foreign employer has a U.S. branch. 
D)  Chang has no U.S.-source income, under the commercial traveler exception. 
A)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because she is in the U.S. for 90 days or less. 
B)  Chang has $2,500 U.S.-source income which is exempt from U.S. taxation, because the amount paid to her is less than $3,000. 
C)  Chang has $2,500 U.S.-source income, because her foreign employer has a U.S. branch. 
D)  Chang has no U.S.-source income, under the commercial traveler exception.

Question 17

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 tax at capital gains rates under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 18

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the source of AirCo's inventory sales income?

Accepted Answer

A)  100% U.S. source. 
B)  100% foreign source. 
C)  50% U.S. source and 50% foreign source. 
D)  50% foreign source and 50% sourced based on location of manufacturing assets. 
A)  100% U.S. source. 
B)  100% foreign source. 
C)  50% U.S. source and 50% foreign source. 
D)  50% foreign source and 50% sourced based on location of manufacturing assets.

Question 19

U.S. income tax treaties typically:

Accepted Answer

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

Question 20

Kilps, a U.S. corporation, receives a $200,000 dividend from a 20% owned foreign corporation. The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000. Kilps's U.S. tax liability before the FTC is $350,000, the gross dividend income is $240,000, and Kilps's worldwide taxable income is $1 million. Kilps's foreign tax credit for the taxable year is:

Accepted Answer

A)  $84,000. 
B)  $70,000. 
C)  $40,000. 
D)  $30,000. 
A)  $84,000. 
B)  $70,000. 
C)  $40,000. 
D)  $30,000.

Subpart F income includes portfolio income like dividends and interest.

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

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

With respect to income generated by nonU.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.source?

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.

Ownership percentage required before a deemed paid foreign tax credit is allowed.

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.

Columbia, Inc., a U.S. corporation, receives a $150,000 cash dividend from Starke, Ltd. Columbia owns 15% of Starke. Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P. What is Columbia's gross income related to the Starke dividend?

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Shareholders of Voting foreign corporation power Classification Murray 24% U.S. person Nancy 20% U.S. person Otto 40% Foreign person Patricia 16% U.S. person Patricia is Murray's daughter.

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

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Which of the following statements is false in regard to the U.S. income tax treaty program?

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

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 tax at capital gains rates under FIRPTA.

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the source of AirCo's inventory sales income?

U.S. income tax treaties typically:

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings 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

Taxes on the Financial Statements

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

Subpart F income includes portfolio income like dividends and interest.

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

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

With respect to income generated by non­U.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.­source?

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.

Ownership percentage required before a deemed paid foreign tax credit is allowed.

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.

Columbia, Inc., a U.S. corporation, receives a $150,000 cash dividend from Starke, Ltd. Columbia owns 15% of Starke. Starke's E & P is $2 million and it has paid foreign taxes of $750,000 attributable to that E & P. What is Columbia's gross income related to the Starke dividend?

Given the following information, determine if FanCo, a foreign corporation, is a CFC. Shareholders of Voting foreign corporation power Classification Murray 24% U.S. person Nancy 20% U.S. person Otto 40% Foreign person Patricia 16% U.S. person Patricia is Murray's daughter.

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

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Which of the following statements is false in regard to the U.S. income tax treaty program?

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation. In November, Chang spends 10 days in the United States performing consulting services for Fisher's U.S. branch. She earns $5,000 per month. A month includes 20 workdays.

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 tax at capital gains rates under FIRPTA.

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the source of AirCo's inventory sales income?

U.S. income tax treaties typically:

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings 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

Taxes on the Financial Statements

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

With respect to income generated by nonU.S. persons, does the U.S. apply a "worldwide" or a "territorial" approach. Be specific.

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.source?

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