Question 1

A domestic corporation is one whose assets are primarily (> 50%) located in the U.S.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

Accepted Answer

A) Foreign persons with U.S.activities. 
B) Foreign persons with only foreign activities. 
C) U.S.employees working abroad. 
D) U.S.persons with foreign activities. 
A) Foreign persons with U.S.activities. 
B) Foreign persons with only foreign activities. 
C) U.S.employees working abroad. 
D) U.S.persons with foreign activities.

Question 3

Which of the following statements regarding a foreign person's U.S.tax consequences is true?

Accepted Answer

A) Foreign persons are potentially subject to U.S.withholding tax on U.S.-source investment income. 
B) Foreign individuals may be subject to U.S.income tax but foreign corporations are never subject to U.S.income tax. 
C) Foreign persons are only subject to U.S.income or withholding tax if engaged in a U.S.trade or business. 
D) Foreign persons must be physically present in the United States before any U.S.-source income is subject to U.S.income or withholding tax. 
A) Foreign persons are potentially subject to U.S.withholding tax on U.S.-source investment income. 
B) Foreign individuals may be subject to U.S.income tax but foreign corporations are never subject to U.S.income tax. 
C) Foreign persons are only subject to U.S.income or withholding tax if engaged in a U.S.trade or business. 
D) Foreign persons must be physically present in the United States before any U.S.-source income is subject to U.S.income or withholding tax.

Question 4

An advance pricing agreement (APA) is used between:

Accepted Answer

A) Two or more governments. 
B) Two related taxpayers. 
C) The taxpayer and the IRS. 
D) The IRS and U.S.taxing authorities. 
A) Two or more governments. 
B) Two related taxpayers. 
C) The taxpayer and the IRS. 
D) The IRS and U.S.taxing authorities.

Question 5

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 6

Collins, Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.U.S.tax before the FTC is $175,000.Collins' current year FTC is $87,500.

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

In allocating interest expense between U.S.and foreign sources, a taxpayer must use the tax basis of the income-producing assets.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g.§§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Accepted Answer

Section 367 provides for the immediate t

Question 12

Given the following information, determine whether Greta, an alien, is a U.S.resident for 2012.Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

Accepted Answer

@#IMG-DLM& If Greta would prefer a different resul

Question 13

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.

Question 14

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 15

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 16

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) Residence of the taxpayer is an important consideration in applying tax treaties, while the presence of a permanent establishment is not. 
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) Residence of the taxpayer is an important consideration in applying tax treaties, while the presence of a permanent establishment is not. 
D) None of the above statements is false.

Question 17

USCo, a domestic corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million 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) $200,000. 
B) $300,000. 
C) $10 million. 
D) $15 million. 
A) $200,000. 
B) $300,000. 
C) $10 million. 
D) $15 million.

Question 18

Copp, Inc., a domestic corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year.Included in that amount is $20 million of Subpart F income.Copp has been a CFC for the entire year and makes no distributions in the current year.Copp must include in gross income (before any § 78 gross-up):

Accepted Answer

A) $0. 
B) $50 million. 
C) $20 million. 
D) $6 million. 
A) $0. 
B) $50 million. 
C) $20 million. 
D) $6 million.

Question 19

Chang, an NRA, is employed by Fisher, Inc., a foreign corporation.In November, Chang spends 12 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 no U.S.-source income, under the commercial traveler exception. 
B) Chang has $3,000 U.S.-source income, since her foreign employer has a U.S.branch. 
C) Chang has $60,000 U.S.-source income which is exempt from U.S.taxation, since she is in the U.S.for 90 days or less. 
D) Chang has $60,000 U.S.-source income which is exempt from U.S.taxation, since she is working for a foreign employer. 
A) Chang has no U.S.-source income, under the commercial traveler exception. 
B) Chang has $3,000 U.S.-source income, since her foreign employer has a U.S.branch. 
C) Chang has $60,000 U.S.-source income which is exempt from U.S.taxation, since she is in the U.S.for 90 days or less. 
D) Chang has $60,000 U.S.-source income which is exempt from U.S.taxation, since she is working for a foreign employer.

Question 20

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.

Exam 25: Taxation of International Transactions

A domestic corporation is one whose assets are primarily (> 50%) located in the U.S.

Which of the following persons typically is not concerned with the U.S.-sourcing rules for gross income?

Which of the following statements regarding a foreign person's U.S.tax consequences is true?

An advance pricing agreement (APA) is used between:

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

Collins, Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.U.S.tax before the FTC is $175,000.Collins' current year FTC is $87,500.

In allocating interest expense between U.S.and foreign sources, a taxpayer must use the tax basis of the income-producing assets.

Which of the following statements regarding the sourcing of dividend income 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.

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g.§§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Given the following information, determine whether Greta, an alien, is a U.S.resident for 2012.Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

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 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?

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 12 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.

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

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

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