Question 1

Which of the following statements regarding the sourcing of gross income is true?

Accepted Answer

A) All else equal,a U.S.corporation prefers that more of its U.S.taxable income be characterized as foreign source,to increase its foreign tax credit limitation. 
B) All else equal,a U.S.corporation prefers that less of its U.S.taxable income be characterized as foreign-source,to increase its foreign tax credit limitation. 
C) All trade or business income earned by a U.S.corporation is treated as U.S.-source income. 
D) All investment income earned by a U.S.corporation is treated as U.S.-source income. 
A) All else equal,a U.S.corporation prefers that more of its U.S.taxable income be characterized as foreign source,to increase its foreign tax credit limitation. 
B) All else equal,a U.S.corporation prefers that less of its U.S.taxable income be characterized as foreign-source,to increase its foreign tax credit limitation. 
C) All trade or business income earned by a U.S.corporation is treated as U.S.-source income. 
D) All investment income earned by a U.S.corporation is treated as U.S.-source income.

Question 2

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

Accepted Answer

A) True 
 B)False

Question 3

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Accepted Answer

A) $35,000. 
B) $30,000. 
C) $5,000. 
D) $95,000. 
A) $35,000. 
B) $30,000. 
C) $5,000. 
D) $95,000.

Question 4

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A) Everything else equal,larger foreign-source income increases the foreign tax credit limitation for U.S.persons. 
B) Everything else equal,larger foreign-source income decreases the foreign tax credit limitation for U.S.persons. 
C) Everything else equal,changing foreign-source income has no impact on the foreign tax credit limitation for U.S.persons. 
D) Everything else equal,larger U.S.-source income increases the foreign tax credit limitation for U.S.persons. 
A) Everything else equal,larger foreign-source income increases the foreign tax credit limitation for U.S.persons. 
B) Everything else equal,larger foreign-source income decreases the foreign tax credit limitation for U.S.persons. 
C) Everything else equal,changing foreign-source income has no impact on the foreign tax credit limitation for U.S.persons. 
D) Everything else equal,larger U.S.-source income increases the foreign tax credit limitation for U.S.persons.

Question 5

Which of the following statements regarding translation of foreign taxes is true?

Accepted Answer

A) Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S.dollars when used as a FTC on a U.S.return. 
B) Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer. 
C) Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade. 
D) Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States. 
A) Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S.dollars when used as a FTC on a U.S.return. 
B) Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer. 
C) Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade. 
D) Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States.

Question 6

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation?

Accepted Answer

A) High withholding tax interest income. 
B) Passive income. 
C) General limitation income. 
D) None of the above are separate FTC limitation categories. 
E) All of the above are separate FTC limitation categories. 
A) High withholding tax interest income. 
B) Passive income. 
C) General limitation income. 
D) None of the above are separate FTC limitation categories. 
E) All of the above are separate FTC limitation categories.

Question 8

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

Accepted Answer

A) Repatriating more foreign income to the United States in the year there is an excess limitation. 
B) Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S.tax rate. 
C) Deducting the excess foreign taxes. 
D) a. ,b. ,and c. 
A) Repatriating more foreign income to the United States in the year there is an excess limitation. 
B) Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S.tax rate. 
C) Deducting the excess foreign taxes. 
D) a. ,b. ,and c.

Question 9

The purpose of the deemed paid foreign tax credit is:

Accepted Answer

A) To allow foreign corporations to compete fairly with U.S.corporations doing business in the foreign jurisdiction. 
B) To allow U.S.corporations operating through foreign subsidiaries to receive a foreign tax credit for income taxes paid by their subsidiaries. 
C) To allow U.S.corporations operating through foreign branches to receive a foreign tax credit for income taxes paid by their branches. 
D) To allow U.S.corporations to compete fairly with foreign corporations doing business in the United States. 
A) To allow foreign corporations to compete fairly with U.S.corporations doing business in the foreign jurisdiction. 
B) To allow U.S.corporations operating through foreign subsidiaries to receive a foreign tax credit for income taxes paid by their subsidiaries. 
C) To allow U.S.corporations operating through foreign branches to receive a foreign tax credit for income taxes paid by their branches. 
D) To allow U.S.corporations to compete fairly with foreign corporations doing business in the United States.

Question 10

"Inbound" and "offshore" transfers are exempt from taxation under § 367.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 $90,000 of depreciation deductions on the equipment,all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $10,000 on the date of sale.What is the source of the $340,000 gain on the sale of this equipment?

Accepted Answer

A) $250,000 U.S.source and $90,000 foreign source. 
B) $250,000 foreign source and $90,000 U.S.source. 
C) $340,000 foreign source. 
D) $340,000 U.S.source. 
A) $250,000 U.S.source and $90,000 foreign source. 
B) $250,000 foreign source and $90,000 U.S.source. 
C) $340,000 foreign source. 
D) $340,000 U.S.source.

Question 13

KeenCo,a domestic corporation,is the sole shareholder of LovettCo,a controlled foreign corporation.LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo and $200,000 E & P attributable to income taxed to the U.S.shareholder as Subpart F income.LovettCo makes a $125,000 dividend distribution to KeenCo.Ignoring any deemed paid credit implications,what is the U.S.gross income to KeenCo resulting from this dividend?

Accepted Answer

$0.A controlled foreign corporation must

Question 14

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

Accepted Answer

A) Foreign persons must be physically present in the United States before any U.S.-source income is subject to U.S.income or withholding tax. 
B) Foreign individuals may be subject to U.S.income tax but foreign corporations are never subject to U.S.income tax. 
C) Foreign persons are only subject to U.S.income or withholding tax if engaged in a U.S.trade or business. 
D) Foreign persons are potentially subject to U.S.withholding tax on U.S.-source investment income. 
A) Foreign persons must be physically present in the United States before any U.S.-source income is subject to U.S.income or withholding tax. 
B) Foreign individuals may be subject to U.S.income tax but foreign corporations are never subject to U.S.income tax. 
C) Foreign persons are only subject to U.S.income or withholding tax if engaged in a U.S.trade or business. 
D) Foreign persons are potentially subject to U.S.withholding tax on U.S.-source investment income.

Question 15

Gain or loss on the exchange of foreign currency must be considered separately from the underlying transaction (e.g. ,the purchase or sale of goods).

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements regarding the sourcing of dividend income is true?

Accepted Answer

A) Dividends are sourced based on the residence of the recipient. 
B) Dividends from a U.S.corporation are U.S.source,without regard to whether the U.S.corporation is an 80-20 company. 
C) Dividends from a U.S.corporation are foreign-source,if the U.S.corporation is an 80-20 company. 
D) Dividends from a U.S.corporation are foreign-source based on the percentage of foreign-source income earned by the U.S.payor. 
A) Dividends are sourced based on the residence of the recipient. 
B) Dividends from a U.S.corporation are U.S.source,without regard to whether the U.S.corporation is an 80-20 company. 
C) Dividends from a U.S.corporation are foreign-source,if the U.S.corporation is an 80-20 company. 
D) Dividends from a U.S.corporation are foreign-source based on the percentage of foreign-source income earned by the U.S.payor.

Question 17

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 18

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

Question 19

Which of the following transactions,if entered into by an NRA,is not subject to U.S.taxation?

Accepted Answer

A) Sale of stock of a foreign corporation whose only asset is a U.S.building. 
B) Sale of a commercial building located in Houston,Texas,and owned directly by the NRA. 
C) Sale of stock of a domestic corporation whose only asset is undeveloped U.S.real estate. 
D) Sale of partnership interest.Partnership's assets are predominantly U.S.real estate. 
A) Sale of stock of a foreign corporation whose only asset is a U.S.building. 
B) Sale of a commercial building located in Houston,Texas,and owned directly by the NRA. 
C) Sale of stock of a domestic corporation whose only asset is undeveloped U.S.real estate. 
D) Sale of partnership interest.Partnership's assets are predominantly U.S.real estate.

Question 20

Which of the following foreign taxes paid by a U.S.corporation are eligible for the foreign tax credit?

Accepted Answer

A) Real property taxes. 
B) Value added taxes. 
C) Dividend withholding taxes. 
D) Sales taxes. 
A) Real property taxes. 
B) Value added taxes. 
C) Dividend withholding taxes. 
D) Sales taxes.

Exam 25: Taxation of International Transactions

Which of the following statements regarding the sourcing of gross income is true?

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Which of the following statements regarding income sourcing is correct?

Which of the following statements regarding translation of foreign taxes is true?

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation?

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

The purpose of the deemed paid foreign tax credit is:

"Inbound" and "offshore" transfers are exempt from taxation under § 367.

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.

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

Gain or loss on the exchange of foreign currency must be considered separately from the underlying transaction (e.g. ,the purchase or sale of goods).

Which of the following statements regarding the sourcing of dividend income is true?

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

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 transactions,if entered into by an NRA,is not subject to U.S.taxation?

Which of the following foreign taxes paid by a U.S.corporation are eligible for the foreign tax credit?

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

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