Question 1

Which of the following is a principle used in applying income sourcing under U.S.rules?

Accepted Answer

A) Location of economic activity. 
B) Country with lowest tax rate. 
C) Country with highest tax rate. 
D) Potential size of allowed foreign tax credit. 
A) Location of economic activity. 
B) Country with lowest tax rate. 
C) Country with highest tax rate. 
D) Potential size of allowed foreign tax credit.

Question 2

Amber,Inc. ,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Accepted Answer

A) $225,000. 
B) $150,000. 
C) $33,750. 
D) $22,500. 
A) $225,000. 
B) $150,000. 
C) $33,750. 
D) $22,500.

Question 3

Quest is organized and operates in the U.K.Its U.S.effectively connected earnings for the taxable year are $900,000 and its net U.S.equity has increased by $40,000.Quest's dividend equivalent amount for the tax year is $860,000.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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 6

Section 482 is used by the Treasury to:

Accepted Answer

A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income,deductions,etc. ,to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S.corporations with non-U.S.owners. 
D) All of the above. 
E) None of the above. 
A) Force taxpayers to use arms-length transfer pricing on transactions between related parties. 
B) Reallocate income,deductions,etc. ,to a related taxpayer to minimize tax liability. 
C) Increase information that is reported about U.S.corporations with non-U.S.owners. 
D) All of the above. 
E) None of the above.

Question 7

Given the following information,determine if FanCo,a foreign corporation,is a CFC.

Accepted Answer

Patricia is Murray's daughter.
 @#IMG-DLM& Murray,

Question 8

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 9

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 10

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 11

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 12

Bighley shows the following results for the year.Bighley offsets the general-basket loss against U.S.-source income for the current tax year.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

Accepted Answer

A) Nondiscrimination tax. 
B) Windfall U.S.profits tax. 
C) Dividend repatriation tax. 
D) Branch profits tax. 
A) Nondiscrimination tax. 
B) Windfall U.S.profits tax. 
C) Dividend repatriation tax. 
D) Branch profits tax.

Question 14

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 15

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 16

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 17

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.

Question 18

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 19

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 20

Unused foreign tax credits are carried back one year and then forward 10 years.

Accepted Answer

A) True 
 B)False

Which of the following is a principle used in applying income sourcing under U.S.rules?

Amber,Inc. ,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Quest is organized and operates in the U.K.Its U.S.effectively connected earnings for the taxable year are $900,000 and its net U.S.equity has increased by $40,000.Quest's dividend equivalent amount for the tax year is $860,000.

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.

Section 482 is used by the Treasury to:

Given the following information,determine if FanCo,a foreign corporation,is a CFC.

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?

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

Bighley shows the following results for the year.Bighley offsets the general-basket loss against U.S.-source income for the current tax year.

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

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.

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

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:

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?

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.

Unused foreign tax credits are carried back one year and then forward 10 years.

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 is a principle used in applying income sourcing under U.S.rules?

Amber,Inc. ,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Quest is organized and operates in the U.K.Its U.S.effectively connected earnings for the taxable year are $900,000 and its net U.S.equity has increased by $40,000.Quest's dividend equivalent amount for the tax year is $860,000.

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.

Section 482 is used by the Treasury to:

Given the following information,determine if FanCo,a foreign corporation,is a CFC.

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?

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

Bighley shows the following results for the year.Bighley offsets the general-basket loss against U.S.-source income for the current tax year.

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S.trade or business?

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.

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

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:

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?

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.

Unused foreign tax credits are carried back one year and then forward 10 years.

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