Question 1

Which of the following statements regarding income sourcing is not correct?

Accepted Answer

A) Concerning the foreign tax credit, most U.S. persons benefit from earning low-tax foreign-source income. 
B) Foreign persons generally benefit from avoiding U.S.-source income classification. 
C) U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system. 
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States. 
A) Concerning the foreign tax credit, most U.S. persons benefit from earning low-tax foreign-source income. 
B) Foreign persons generally benefit from avoiding U.S.-source income classification. 
C) U.S. persons are not concerned with source of income because all their income is subject to U.S. tax under a worldwide system. 
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States. C

Question 2

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) U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language. 
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) U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language. 
D) None of the above statements is false. C

Question 3

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  False

Question 4

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 tax at capital gains rates under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 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) $0 
B) $50,000 
C) $85,000 
D) $100,000 
A) $0 
B) $50,000 
C) $85,000 
D) $100,000

Question 8

Which of the following is 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

Describe and diagram the timeline that most businesses use to enter the international markets.

Accepted Answer

Most businesses ente

Question 10

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 11

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo historically has earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

Accepted Answer

A) $0 
B) $10,500 
C) $39,500 
D) $50,000 
A) $0 
B) $10,500 
C) $39,500 
D) $50,000

Question 12

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 13

SunCo,a U.S.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 14

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 15

The sourcing rules of Federal income taxation apply to deductions as well as to income items.

Accepted Answer

A) True 
 B)False

Question 16

Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation and apportionment
d.Qualified business unit
e.Tax haven
f.Income tax treaty
g.Section 482
-Foreign taxpayers earning income inside the United States.

Accepted Answer

The answer of Match the definition with the correct term.
a.Inbound
b.Outbound
c.Allocation...

Question 17

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

Accepted Answer

A) Non-U.S. persons may be subject to U.S. withholding tax on U.S.-source investment income. 
B) Non-U.S. individuals may be subject to U.S. income tax but non-U.S. corporations are never subject to U.S. income tax. 
C) Non-U.S. persons are only subject to U.S. income or withholding tax if engaged in a U.S. trade or business. 
D) Non-U.S. 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) Non-U.S. persons may be subject to U.S. withholding tax on U.S.-source investment income. 
B) Non-U.S. individuals may be subject to U.S. income tax but non-U.S. corporations are never subject to U.S. income tax. 
C) Non-U.S. persons are only subject to U.S. income or withholding tax if engaged in a U.S. trade or business. 
D) Non-U.S. 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 18

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.8€.Wood's exchange gain or loss is:

Accepted Answer

A) $15,000 loss. 
B) $15,000 gain. 
C) $75,000 gain. 
D) $0. There is no exchange gain or loss on a dividend distribution. 
A) $15,000 loss. 
B) $15,000 gain. 
C) $75,000 gain. 
D) $0. There is no exchange gain or loss on a dividend distribution.

Question 19

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
a.Foreign base company income
b.Foreign personal holding company income
c.Controlled foreign corporation
d.U.S. shareholder
e.Previously taxed income
f.More than 10 percent
g.More than 50 percent
h.More than 80 percent
-Ownership threshold for U.S.shareholders to be deemed a controlled foreign corporation.

Accepted Answer

The answer of Match the definition with the correct term....

Question 20

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.

Exam 25: Taxation of International Transactions

Which of the following statements regarding income sourcing is not correct?

Which of the following statements is false in regard to the U.S.income tax treaty program?

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

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 tax at capital gains rates under FIRPTA.

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?

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?

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Describe and diagram the timeline that most businesses use to enter the international markets.

Which of the following statements regarding income sourcing is correct?

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo historically has earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

Section 482 is used by the Treasury to:

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 sourcing rules of Federal income taxation apply to deductions as well as to income items.

Match the definition with the correct term. a.Inbound b.Outbound c.Allocation and apportionment d.Qualified business unit e.Tax haven f.Income tax treaty g.Section 482 -Foreign taxpayers earning income inside the United States.

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

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.8€.Wood's exchange gain or loss is:

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

Property Transactions, capital Gains and Losses, sec1231, and 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 Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters