Question 1

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Accepted Answer

A) If title passes on the inventory outside the U.S. ,all of the inventory income is foreign source. 
B) Because the inventory is manufactured in the U.S. ,all of the inventory income is U.S.source. 
C) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets. 
D) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place. 
A) If title passes on the inventory outside the U.S. ,all of the inventory income is foreign source. 
B) Because the inventory is manufactured in the U.S. ,all of the inventory income is U.S.source. 
C) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets. 
D) The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place. C

Question 2

Old,Inc. ,a U.S.corporation,earns foreign-source income classified in two different limitation baskets in the current year.It earns $20,000 in passive income and suffers a net loss of $45,000 in the general limitation basket.What is the numerator of the FTC limitation formula for the passive basket in the current year?

Accepted Answer

A) ($25,000). 
B) $0. 
C) $20,000. 
D) $25,000. 
A) ($25,000). 
B) $0. 
C) $20,000. 
D) $25,000. B

Question 3

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

Accepted Answer

A) True 
 B)False  False

Question 4

Kunst,a domestic corporation,generates $100,000 of foreign-source income in the general income basket and $40,000 of foreign-source income in the passive income basket.Kunst's worldwide taxable income is $1,200,000,and its U.S.tax liability before FTC is $420,000.Foreign taxes attributable to the general income basket are $60,000 and to the passive income are $4,000.What is Kunst's foreign tax credit for the tax year?

Accepted Answer

A) $64,000. 
B) $39,000. 
C) $35,000. 
D) $4,000. 
A) $64,000. 
B) $39,000. 
C) $35,000. 
D) $4,000.

Question 5

Nico lives in California.She was born in Peru but holds a green card.Nico is a nonresident alien (NRA).

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

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

Jilt,a non-U.S.corporation,not resident in a treaty country,operates a U.S.branch that earns effectively connected E & P of $4 million for the tax year.The branch increases its investments in U.S.property (its U.S.net equity)by $1,600,000.The branch pays a U.S.corporate income tax of $2,153,846.Jilt's branch profits tax is:

Accepted Answer

A) $720,000. 
B) $1,200,000. 
C) $2,153,846. 
D) $2,873,846. 
A) $720,000. 
B) $1,200,000. 
C) $2,153,846. 
D) $2,873,846.

Question 9

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly,indirectly,and constructively at least 50% of the voting power of a foreign corporation.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

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 13

Magdala is a citizen of Italy and does not have permanent resident status in the United States.During the last three years she has spent a number of days in the United States.   Is Magdala treated as a U.S.resident for the current year?

Accepted Answer

A) Yes,because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years (using the appropriate fractions for the prior years). 
B) No,because Magdala is a citizen of Italy. 
C) No,because Magdala was not present in the United States at least 183 days during the current year. 
D) No,because although Magdala was present in the United States at least 31 days during the current year,she was not present at least 183 days in a single year during the current or prior two years. 
A) Yes,because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years (using the appropriate fractions for the prior years). 
B) No,because Magdala is a citizen of Italy. 
C) No,because Magdala was not present in the United States at least 183 days during the current year. 
D) No,because although Magdala was present in the United States at least 31 days during the current year,she was not present at least 183 days in a single year during the current or prior two years.

Question 14

During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Accepted Answer

Collins meets the 80% active foreign bus

Question 15

Qwan,a U.S.corporation,reports $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.Qwan's U.S.and foreign assets are reported as follows.   How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

Accepted Answer

A) Using tax book values. 
B) Using tax book value for U.S.source and fair market value for foreign source. 
C) Using fair market values. 
D) Using fair market value for U.S.source and tax book value for foreign source. 
A) Using tax book values. 
B) Using tax book value for U.S.source and fair market value for foreign source. 
C) Using fair market values. 
D) Using fair market value for U.S.source and tax book value for foreign source.

Question 16

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Accepted Answer

A) $30 million. 
B) $25 million. 
C) $30 million less any tax paid on U.S.income. 
D) $25 million less any tax paid on the foreign income. 
A) $30 million. 
B) $25 million. 
C) $30 million less any tax paid on U.S.income. 
D) $25 million less any tax paid on the foreign income.

Question 17

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

Accepted Answer

A) $0. 
B) $19,200. 
C) $60,800. 
D) $80,000. 
A) $0. 
B) $19,200. 
C) $60,800. 
D) $80,000.

Question 18

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 19

Losses and deductions,similar to income items,can be U.S.- or foreign-source.

Accepted Answer

A) True 
 B)False

Question 20

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.

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

Nico lives in California.She was born in Peru but holds a green card.Nico is a nonresident alien (NRA).

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

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?

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly,indirectly,and constructively at least 50% of the voting power of a foreign corporation.

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

Magdala is a citizen of Italy and does not have permanent resident status in the United States.During the last three years she has spent a number of days in the United States. Is Magdala treated as a U.S.resident for the current year?

During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

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

Losses and deductions,similar to income items,can be U.S.- or foreign-source.

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

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

Nico lives in California.She was born in Peru but holds a green card.Nico is a nonresident alien (NRA).

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

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?

A "U.S.shareholder" for purposes of CFC classification is any U.S.person who owns directly,indirectly,and constructively at least 50% of the voting power of a foreign corporation.

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

Magdala is a citizen of Italy and does not have permanent resident status in the United States.During the last three years she has spent a number of days in the United States. Is Magdala treated as a U.S.resident for the current year?

During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

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

Losses and deductions,similar to income items,can be U.S.- or foreign-source.

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