Question 1

Which of the following transactions by a U.S.corporation may result in taxation under § 367?

Accepted Answer

A) Incorporation of U.S branch as a U.S.corporation when the branch earns foreign-source income. 
B) Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation also has foreign shareholders. 
C) Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation has no foreign shareholders. 
D) All the above. 
E) None of the above. 
A) Incorporation of U.S branch as a U.S.corporation when the branch earns foreign-source income. 
B) Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation also has foreign shareholders. 
C) Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation has no foreign shareholders. 
D) All the above. 
E) None of the above.

Question 2

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 3

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 4

A non-U.S.individual's "green card" remains in effect until:

Accepted Answer

A) The individual discards it. 
B) The individual leaves the United States 
C) The individual remains outside the United States for two years. 
D) The card has been revoked or the individual has abandoned lawful permanent residency in the U.S. 
A) The individual discards it. 
B) The individual leaves the United States 
C) The individual remains outside the United States for two years. 
D) The card has been revoked or the individual has abandoned lawful permanent residency in the U.S.

Question 5

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 6

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 7

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Accepted Answer

A) $100,000. 
B) $28,000. 
C) $18,000. 
D) $0. 
A) $100,000. 
B) $28,000. 
C) $18,000. 
D) $0.

Question 8

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 9

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

Accepted Answer

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

Question 10

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Accepted Answer

A) Foreign persons with only foreign activities. 
B) U.S.persons with U.S.and foreign activities. 
C) U.S.persons with only U.S.activities. 
D) U.S.persons that earn only tax-exempt income. 
A) Foreign persons with only foreign activities. 
B) U.S.persons with U.S.and foreign activities. 
C) U.S.persons with only U.S.activities. 
D) U.S.persons that earn only tax-exempt income.

Question 11

Which of the following is not a foreign person?

Accepted Answer

A) Foreign corporation 51% owned by U.S.shareholders. 
B) Foreign corporation 100% owned by a domestic corporation. 
C) Citizen of Germany with U.S.permanent resident status (i.e., green card). 
D) Citizen of Italy who spends 14 days vacationing in the United States. 
A) Foreign corporation 51% owned by U.S.shareholders. 
B) Foreign corporation 100% owned by a domestic corporation. 
C) Citizen of Germany with U.S.permanent resident status (i.e., green card). 
D) Citizen of Italy who spends 14 days vacationing in the United States.

Question 12

Wood, a U.S.corporation owns 30% of Hout, a foreign corporation.The remaining 70% of Hout is owned by other foreign corporations not controlled by Wood.Hout's functional currency is the euro.Wood receives a 50,000€ distribution from Hout.If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1, the exchange rate at year end is .95€: $1, and on the date of the dividend payment the exchange rate is 1.1€: $1, what is Wood's tax result from the distribution?

Accepted Answer

A) Wood receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2)]. 
B) Wood receives a dividend of $52,632 (50,000€/.95) with no exchange gain or loss. 
C) Wood receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) Wood receives a dividend of $45,455 (50,000€/1.1) with no exchange gain or loss. 
A) Wood receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2)]. 
B) Wood receives a dividend of $52,632 (50,000€/.95) with no exchange gain or loss. 
C) Wood receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) Wood receives a dividend of $45,455 (50,000€/1.1) with no exchange gain or loss.

Question 13

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A) Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S.persons. 
B) Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S.persons. 
C) Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S.persons. 
D) Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S.persons. 
A) Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S.persons. 
B) Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S.persons. 
C) Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S.persons. 
D) Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S.persons.

Question 14

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 15

Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

Accepted Answer

A) Foreign persons are subject to potential withholding taxes on the gross amount of U.S.-source investment income. 
B) Foreign persons with any U.S.-source income are taxed on net investment income (after expenses). 
C) Foreign persons are not subject to U.S.tax if not engaged in a U.S.trade or business. 
D) Foreign persons with only U.S.-source investment income are exempt from U.S.tax. 
E) None of the above statements are true. 
A) Foreign persons are subject to potential withholding taxes on the gross amount of U.S.-source investment income. 
B) Foreign persons with any U.S.-source income are taxed on net investment income (after expenses). 
C) Foreign persons are not subject to U.S.tax if not engaged in a U.S.trade or business. 
D) Foreign persons with only U.S.-source investment income are exempt from U.S.tax. 
E) None of the above statements are true.

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

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 18

During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for $350,000, with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $20,000 on the date of sale.What is the source of the $330,000 gain on the sale of this equipment?

Accepted Answer

A) $330,000 foreign source. 
B) $330,000 U.S.source. 
C) $250,000 foreign source and $80,000 U.S.source. 
D) $250,000 U.S.source and $80,000 foreign source. 
A) $330,000 foreign source. 
B) $330,000 U.S.source. 
C) $250,000 foreign source and $80,000 U.S.source. 
D) $250,000 U.S.source and $80,000 foreign source.

Question 19

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 20

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

Accepted Answer

A) True 
 B)False

Exam 25: Taxation of International Transactions

Which of the following transactions by a U.S.corporation may result in taxation under § 367?

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

A non-U.S.individual's "green card" remains in effect until:

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

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

U.S.income tax treaties:

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

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Which of the following is not a foreign person?

Which of the following statements regarding income sourcing is correct?

Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

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

Hendricks Corporation, a domestic corporation, owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation, both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

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?

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

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