Question 1

The most important influence on transfer pricing decisions is

Accepted Answer

A)  management of cash flows. 
B)  market conditions in the foreign country. 
C)  exchange controls. 
D)  U.S. export incentives. 
A)  management of cash flows. 
B)  market conditions in the foreign country. 
C)  exchange controls. 
D)  U.S. export incentives.

Question 2

The concept which assets that Hong Kong should only tax income that is earned in Hong is know as the

Accepted Answer

A)  worldwide approach. 
B)  territorial approach. 
C)  multidomestic approach. 
D)  transnational approach. 
A)  worldwide approach. 
B)  territorial approach. 
C)  multidomestic approach. 
D)  transnational approach.

Question 3

Double taxation occurs on corporation income and stockholders' dividend income.

Accepted Answer

A) True 
 B)False

Question 4

All of the following foreign corporations derive more than 50 percent of their income from subpart F income. Which of them must recognize the subpart F income in the year in which it is earned? The percentage ownership of each shareholder is provided in parenthesis.

Accepted Answer

A)  U.S. shareholder A (10), Foreign shareholder B (20), U.S. shareholder C (35), U.S. shareholder D (5), Foreign shareholder E (15), U.S. shareholder F (15) 
B)  U.S. shareholder A (5), Foreign shareholder B (40), U.S. shareholder C (15), U.S. shareholder D (15), Foreign shareholder E (10), U.S. shareholder F (15) 
C)  U.S. shareholder A (50), Foreign shareholder B (20), U.S. shareholder C (5), U.S. shareholder D (5), Foreign shareholder E (15), U.S. shareholder F (5) 
D)  all of the above since subpart F income exceeds 50 percent of total. 
A)  U.S. shareholder A (10), Foreign shareholder B (20), U.S. shareholder C (35), U.S. shareholder D (5), Foreign shareholder E (15), U.S. shareholder F (15) 
B)  U.S. shareholder A (5), Foreign shareholder B (40), U.S. shareholder C (15), U.S. shareholder D (15), Foreign shareholder E (10), U.S. shareholder F (15) 
C)  U.S. shareholder A (50), Foreign shareholder B (20), U.S. shareholder C (5), U.S. shareholder D (5), Foreign shareholder E (15), U.S. shareholder F (5) 
D)  all of the above since subpart F income exceeds 50 percent of total.

Question 5

Which of the following is true concerning taxable earnings of foreign corporations according to the U.S. IRS?

Accepted Answer

A)  The temporal method must be used to translate financial statements into dollars. 
B)  Active income of a CFC is not recognized until distributed as a dividend. 
C)  Passive income does not need to be recognized. 
D)  Passive income of a CFC is taxed after being translated into dollars at the average exchange rate. 
A)  The temporal method must be used to translate financial statements into dollars. 
B)  Active income of a CFC is not recognized until distributed as a dividend. 
C)  Passive income does not need to be recognized. 
D)  Passive income of a CFC is taxed after being translated into dollars at the average exchange rate.

Question 6

Two different approaches to the taxation of foreign source income are the territorial approach and the statutory approach.

Accepted Answer

A) True 
 B)False

Question 7

In order the minimize the effects of double taxation, the U.S.

Accepted Answer

A)  permits the use of a tax credit. 
B)  allows firms to use the split rate or imputation tax system. 
C)  allows MNEs to use the lower of the U.S. or foreign tax rate. 
D)  requires firms to deduct foreign income taxes paid. 
A)  permits the use of a tax credit. 
B)  allows firms to use the split rate or imputation tax system. 
C)  allows MNEs to use the lower of the U.S. or foreign tax rate. 
D)  requires firms to deduct foreign income taxes paid.

Question 8

The principle whereby foreign source income is not taxed until received by the U.S. shareholder is known as

Accepted Answer

A)  the tax credit. 
B)  deferral. 
C)  a tax treaty. 
D)  double taxation. 
A)  the tax credit. 
B)  deferral. 
C)  a tax treaty. 
D)  double taxation.

Question 9

Subpart F income

Accepted Answer

A)  is active income if earned in low-tax countries. 
B)  is not eligible for the deferral principle. 
C)  is eligible for the tax credit. 
D)  requires that income be earned from the sale or purchase of goods produced inside the country where the tax haven corporation is located. 
A)  is active income if earned in low-tax countries. 
B)  is not eligible for the deferral principle. 
C)  is eligible for the tax credit. 
D)  requires that income be earned from the sale or purchase of goods produced inside the country where the tax haven corporation is located.

Question 10

The total amount of branch profits included in parent income includes the foreign exchange gain.

Accepted Answer

A) True 
 B)False

Question 11

The concept of equity means that

Accepted Answer

A)  under similar circumstances, taxpayers should pay the same tax. 
B)  the tax effect should not have an impact on business decisions. 
C)  assets and liabilities should not be subject to taxation, only increases in equity. 
D)  foreign and domestic source income should always be taxed at the same rate. 
A)  under similar circumstances, taxpayers should pay the same tax. 
B)  the tax effect should not have an impact on business decisions. 
C)  assets and liabilities should not be subject to taxation, only increases in equity. 
D)  foreign and domestic source income should always be taxed at the same rate.

Question 12

Assume that a wholesaler purchased goods from a manufacturer was £34.50 (gross price), the VAT is 15%, and the VAT paid by the manufacturer was £4.50. The markup on the merchandise is £10. What is the net amount of VAT paid to Customs and Excise under the British system of computing VAT?

Accepted Answer

A)  £1.5 
B)  £5.0 
C)  £46 
D)  none of the above. 
A)  £1.5 
B)  £5.0 
C)  £46 
D)  none of the above.

Question 13

On January 1, Multicorp, a U.S. firm, sells £200,000 of merchandise on account to an importer in Britain with payment due on February 15. The relevant exchange rates are as follows:
January 1 $1.6260
January 31 $1.5995
February 15 $1.5900
February 28 $1.5855
What would be the gain or loss for U.S. tax purposes on February 15?

Accepted Answer

A)  No gain or loss would be recognized. 
B)  $5,300 loss 
C)  $7,200 loss 
D)  $1,900 loss 
A)  No gain or loss would be recognized. 
B)  $5,300 loss 
C)  $7,200 loss 
D)  $1,900 loss

Question 14

In choosing the correct entry strategy in the context of the tax environment,

Accepted Answer

A)  exports are typically not affected by tax rules since they are made from the home country anyway. 
B)  it is best to organize a foreign branch in the early years if operations are not profitable. 
C)  it is best to organize a foreign subsidiary in the early years if operations are not profitable. 
D)  foreign tax incentives are not useful, because they are typically offset by home country regulations. 
A)  exports are typically not affected by tax rules since they are made from the home country anyway. 
B)  it is best to organize a foreign branch in the early years if operations are not profitable. 
C)  it is best to organize a foreign subsidiary in the early years if operations are not profitable. 
D)  foreign tax incentives are not useful, because they are typically offset by home country regulations.

Question 15

According to the tax credit,

Accepted Answer

A)  companies are allowed to defer the recognition of income until a dividend has been declared by the foreign corporation. 
B)  income can be excluded from U.S. taxation. 
C)  firms can reduce their tax liability by the amount of income taxes paid to foreign governments. 
D)  credits can be given for active but not passive income. 
A)  companies are allowed to defer the recognition of income until a dividend has been declared by the foreign corporation. 
B)  income can be excluded from U.S. taxation. 
C)  firms can reduce their tax liability by the amount of income taxes paid to foreign governments. 
D)  credits can be given for active but not passive income.

Question 16

Tax holidays are days when the government accountants have a vacation.

Accepted Answer

A) True 
 B)False

Question 17

According to the U.S. IRS, which of the following is true concerning the taxation of gains and losses on foreign currency transactions?

Accepted Answer

A)  Gains are recognized when the financial obligation has been settled, but losses are recognized immediately. 
B)  Losses are recognized when the financial obligation has been settled, but gains are recognized immediately. 
C)  Gains and losses are recognized immediately. 
D)  Gains and losses are recognized when the financial obligation has been settled. 
A)  Gains are recognized when the financial obligation has been settled, but losses are recognized immediately. 
B)  Losses are recognized when the financial obligation has been settled, but gains are recognized immediately. 
C)  Gains and losses are recognized immediately. 
D)  Gains and losses are recognized when the financial obligation has been settled.

Question 18

The price set on goods and services transferred between a parent and subsidiary is known as a (an)

Accepted Answer

A)  transfer price. 
B)  arms-length price. 
C)  allocation price. 
D)  none of the above. 
A)  transfer price. 
B)  arms-length price. 
C)  allocation price. 
D)  none of the above.

Question 19

For U.S. companies, why is it an advantage to have a foreign branch in the early years of a foreign enterprise.

Accepted Answer

A)  Branch remittances are subject o withholding taxes. 
B)  Losses can offset home office income for tax purposes. 
C)  Earnings distributed to the home office are translated at the exchange rate in effect at year end. 
D)  Profits are subject to CFC rules. 
A)  Branch remittances are subject o withholding taxes. 
B)  Losses can offset home office income for tax purposes. 
C)  Earnings distributed to the home office are translated at the exchange rate in effect at year end. 
D)  Profits are subject to CFC rules.

Question 20

The concept of neutrality means that

Accepted Answer

A)  under similar circumstances, taxpayers should pay the same tax. 
B)  the tax effect should not have an impact on business decisions. 
C)  assets and liabilities should not be subject to taxation, only increases in equity. 
D)  foreign and domestic source income should always be taxed at the same rate. 
A)  under similar circumstances, taxpayers should pay the same tax. 
B)  the tax effect should not have an impact on business decisions. 
C)  assets and liabilities should not be subject to taxation, only increases in equity. 
D)  foreign and domestic source income should always be taxed at the same rate.

The most important influence on transfer pricing decisions is

The concept which assets that Hong Kong should only tax income that is earned in Hong is know as the

Double taxation occurs on corporation income and stockholders' dividend income.

All of the following foreign corporations derive more than 50 percent of their income from subpart F income. Which of them must recognize the subpart F income in the year in which it is earned? The percentage ownership of each shareholder is provided in parenthesis.

Which of the following is true concerning taxable earnings of foreign corporations according to the U.S. IRS?

Two different approaches to the taxation of foreign source income are the territorial approach and the statutory approach.

In order the minimize the effects of double taxation, the U.S.

The principle whereby foreign source income is not taxed until received by the U.S. shareholder is known as

Subpart F income

The total amount of branch profits included in parent income includes the foreign exchange gain.

The concept of equity means that

Assume that a wholesaler purchased goods from a manufacturer was £34.50 (gross price), the VAT is 15%, and the VAT paid by the manufacturer was £4.50. The markup on the merchandise is £10. What is the net amount of VAT paid to Customs and Excise under the British system of computing VAT?

In choosing the correct entry strategy in the context of the tax environment,

According to the tax credit,

Tax holidays are days when the government accountants have a vacation.

According to the U.S. IRS, which of the following is true concerning the taxation of gains and losses on foreign currency transactions?

The price set on goods and services transferred between a parent and subsidiary is known as a (an)

For U.S. companies, why is it an advantage to have a foreign branch in the early years of a foreign enterprise.

The concept of neutrality means that

International Accounting and International Business

International Accounting Patterns, Culture and Development

Comparative International Financial Accounting I

Comparative International Financial Accounting II

International Financial Statement Analysis

International Transparency and Disclosure

International Accounting Standards and Global Convergence

International Business Combinations, Goodwill and Intangibles

International Segment Reporting

Foreign Currency Transactions and Translation

International Accounting for Price Changes

Corporate Governance and Control of Global Operations

Foreign Exchange Risk Management

International Budgeting and Performance Evaluation

International Auditing Issues

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Exam 16: International Taxation Issues

The most important influence on transfer pricing decisions is

The concept which assets that Hong Kong should only tax income that is earned in Hong is know as the

Double taxation occurs on corporation income and stockholders' dividend income.

All of the following foreign corporations derive more than 50 percent of their income from subpart F income. Which of them must recognize the subpart F income in the year in which it is earned? The percentage ownership of each shareholder is provided in parenthesis.

Which of the following is true concerning taxable earnings of foreign corporations according to the U.S. IRS?

Two different approaches to the taxation of foreign source income are the territorial approach and the statutory approach.

In order the minimize the effects of double taxation, the U.S.

The principle whereby foreign source income is not taxed until received by the U.S. shareholder is known as

Subpart F income

The total amount of branch profits included in parent income includes the foreign exchange gain.

The concept of equity means that

Assume that a wholesaler purchased goods from a manufacturer was £34.50 (gross price), the VAT is 15%, and the VAT paid by the manufacturer was £4.50. The markup on the merchandise is £10. What is the net amount of VAT paid to Customs and Excise under the British system of computing VAT?

In choosing the correct entry strategy in the context of the tax environment,

According to the tax credit,

Tax holidays are days when the government accountants have a vacation.

According to the U.S. IRS, which of the following is true concerning the taxation of gains and losses on foreign currency transactions?

The price set on goods and services transferred between a parent and subsidiary is known as a (an)

For U.S. companies, why is it an advantage to have a foreign branch in the early years of a foreign enterprise.

The concept of neutrality means that

International Accounting and International Business

International Accounting Patterns, Culture and Development

Comparative International Financial Accounting I

Comparative International Financial Accounting II

International Financial Statement Analysis

International Transparency and Disclosure

International Accounting Standards and Global Convergence

International Business Combinations, Goodwill and Intangibles

International Segment Reporting

Foreign Currency Transactions and Translation

International Accounting for Price Changes

Corporate Governance and Control of Global Operations

Foreign Exchange Risk Management

International Budgeting and Performance Evaluation

International Auditing Issues

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