Question 1

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 2

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

Accepted Answer

A) True 
 B)False

Question 3

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Accepted Answer

A) True 
 B)False

Question 4

Xenia, Inc., a U.S.shareholder, owns 100% of Fredonia, a CFC.Xenia receives a $3 million cash distribution from Fredonia.Fredonia's E & P is composed of the following amounts.   Xenia recognizes a taxable dividend of:

Accepted Answer

A) $3 million. 
B) $2.5 million. 
C) $1.5 million. 
D) $1 million. 
E) $0. 
A) $3 million. 
B) $2.5 million. 
C) $1.5 million. 
D) $1 million. 
E) $0.

Question 5

In 2013, George renounces his U.S.citizenship and moves to Fredonia, where income tax rates are very low. George is a multimillionaire and says he "has had it" with high Federal income taxes on wealthy individuals like himself. In 2016, George's U.S.-source income is $1.5 million. That income escapes Federal income taxes.

Accepted Answer

A) True 
 B)False

Question 6

ForCo, a subsidiary of a U.S.corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 7

Abbott, Inc., a domestic corporation, reports worldwide taxable income of $8 million, including a $900,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings.What is Abbott's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Accepted Answer

A) $0. 
B) $600,000. 
C) $900,000. 
D) $18 million. 
A) $0. 
B) $600,000. 
C) $900,000. 
D) $18 million.

Question 8

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 9

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 10

Liang, an NRA, is sent to the United States by Fuller Corporation, her foreign employer.She spends 50 days in the United States and earns $15,000 for a two-month period.This amount is attributable to 40 U.S.working days and 10 foreign working days.Her employer does not have a U.S.trade or business and Liang spends no other time in the U.S.for the tax year.Liang's U.S.-source taxable income is:

Accepted Answer

A) $0. 
B) $3,000. 
C) $12,000. 
D) $15,000. 
A) $0. 
B) $3,000. 
C) $12,000. 
D) $15,000.

Question 11

SunCo, a domestic corporation, owns a number of patents related to designing sunglasses.SunCo licenses these patents to unrelated parties.SpainCo, a Spanish corporation, paid SunCo $78,000 in royalties related to these licenses.SpainCo uses the patent information in its manufacturing process in its Texas plant.WiscCo, a domestic corporation, paid SunCo $32,000 in royalties related to the licenses.WiscCo uses the patent information in its manufacturing process in its Germany manufacturing plant.How much U.S.-source royalty income did SunCo earn from these licenses?

Accepted Answer

A) $0. 
B) $32,000. 
C) $78,000. 
D) $110,000. 
A) $0. 
B) $32,000. 
C) $78,000. 
D) $110,000.

Question 12

With respect to income generated by non-U.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 su

Question 13

Arendt, Inc., a domestic 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 14

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.

Question 15

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

Accepted Answer

· Generate "same basket" foreign-source

Question 16

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Accepted Answer

A) True 
 B)False

Question 17

Ridge, Inc., a domestic corporation, reports worldwide taxable income of $800,000, including a $300,000 dividend from Emma, Inc., a foreign corporation.Ridge's U.S.tax liability before FTC is $280,000.Ridge owns 20% of Emma.Emma's E & P after taxes is $8 million and it has paid foreign taxes of $4 million attributable to that E & P.If Ridge elects the FTC, its U.S.gross income with regard to the dividend from Emma is:

Accepted Answer

A) $450,000. 
B) $300,000. 
C) $90,000. 
D) $60,000. 
A) $450,000. 
B) $300,000. 
C) $90,000. 
D) $60,000.

Question 18

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S.parent corporation.The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo.The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 19

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S.multinational business.

Accepted Answer

A) True 
 B)False

Question 20

USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

Accepted Answer

A) $70,000. 
B) $175,000. 
C) $245,000. 
D) $770,000. 
A) $70,000. 
B) $175,000. 
C) $245,000. 
D) $770,000.

Exam 25: Taxation of International Transactions

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

Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Xenia, Inc., a U.S.shareholder, owns 100% of Fredonia, a CFC.Xenia receives a $3 million cash distribution from Fredonia.Fredonia's E & P is composed of the following amounts. Xenia recognizes a taxable dividend of:

ForCo, a subsidiary of a U.S.corporation incorporated in Belgium, manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is not Subpart F foreign base company sales income.

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

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.

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

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

Your client holds foreign tax credit (FTC) carryforwards, i.e., it is in an "excess credit" position. Give at least three planning ideas that the client should implement, so as to free up the suspended FTCs.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S.parent corporation.The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo.The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S.multinational business.

USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

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