Question 1

Discuss the primary purposes of income tax treaties.

Accepted Answer

The primary purpose of an income tax tre

Question 2

FLCo,a U.S.corporation,has $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.FLCo's U.S.and foreign assets are as follows.   How should FLCo 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 fair market value. 
C) Using tax book value for U.S.source and fair market value for foreign source. 
D) Using fair market value for U.S.source and tax book value for foreign source. 
A) Using tax book values. 
B) Using fair market value. 
C) Using tax book value for U.S.source and fair market value for foreign source. 
D) Using fair market value for U.S.source and tax book value for foreign source.

Question 3

Income tax treaties may provide for higher withholding tax rates on interest income than the rate provided under U.S.statutory law.

Accepted Answer

A) True 
 B)False

Question 4

All losses are apportioned against U.S.-source income.

Accepted Answer

A) True 
 B)False

Question 5

Dividends received from Shamrock,Ltd. ,an Irish corporation that earns 40% of its income from U.S.business activities,are foreign-source income.

Accepted Answer

A) True 
 B)False

Question 6

U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

Accepted Answer

A) True 
 B)False

Question 7

Generally,accrued foreign taxes are:

Accepted Answer

A) Translated at the exchange rate when paid. 
B) Translated at the exchange rate on date accrued. 
C) Translated at the average exchange rate for the tax year. 
D) Translated at the average exchange rate for the last five years. 
A) Translated at the exchange rate when paid. 
B) Translated at the exchange rate on date accrued. 
C) Translated at the average exchange rate for the tax year. 
D) Translated at the average exchange rate for the last five years.

Question 8

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

Accepted Answer

A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source. 
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source. 
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business. 
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax. 
A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source. 
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source. 
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business. 
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax.

Question 9

Section 482 is used to:

Accepted Answer

A) Force taxpayers to use arms-length pricing on transactions between related parties. 
B) Reallocation of income,deductions,etc. ,by a taxpayer to minimize tax liability. 
C) Application to transactions between unrelated parties. 
D) All of the above. 
E) None of the above. 
A) Force taxpayers to use arms-length pricing on transactions between related parties. 
B) Reallocation of income,deductions,etc. ,by a taxpayer to minimize tax liability. 
C) Application to transactions between unrelated parties. 
D) All of the above. 
E) None of the above.

Question 10

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

Accepted Answer

A) $39,000. 
B) $64,000. 
C) $60,000. 
D) $4,000. 
E) Some other amount. 
A) $39,000. 
B) $64,000. 
C) $60,000. 
D) $4,000. 
E) Some other amount.

Question 11

If a foreign corporation's U.S.effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000,its DEA is $940,000.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not prevent an alien without a "green card" from being classified as a U.S.resident for income tax purposes?

Accepted Answer

A) The individual was in the United States to oversee her investments. 
B) The individual was prevented from leaving the United States due to an illness which arose while in the United States. 
C) The individual is a foreign consul assigned to the United States. 
D) The individual commutes daily from Mexico to the United States to work. 
A) The individual was in the United States to oversee her investments. 
B) The individual was prevented from leaving the United States due to an illness which arose while in the United States. 
C) The individual is a foreign consul assigned to the United States. 
D) The individual commutes daily from Mexico to the United States to work.

Question 13

Without the foreign tax credit,double taxation would result when:

Accepted Answer

A) The United States taxes the U.S.-source income of a U.S.resident. 
B) The United States and a foreign country both tax the foreign-source income of a U.S.resident. 
C) A foreign country taxes the foreign-source income of a nonresident alien. 
D) Only the United States taxes the foreign-source income of a U.S.resident (e.g. ,a treaty prevents foreign taxation). 
A) The United States taxes the U.S.-source income of a U.S.resident. 
B) The United States and a foreign country both tax the foreign-source income of a U.S.resident. 
C) A foreign country taxes the foreign-source income of a nonresident alien. 
D) Only the United States taxes the foreign-source income of a U.S.resident (e.g. ,a treaty prevents foreign taxation).

Question 14

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Accepted Answer

A) True 
 B)False

Question 15

A controlled foreign corporation (CFC)realizes Subpart F income from:

Accepted Answer

A) Purchase of inventory from unrelated party and sale to anyone outside the CFC country. 
B) Services performed for the U.S.parent in a country in which the CFC was organized. 
C) Purchase of inventory from a related party and sale to anyone outside the CFC country. 
D) Services reformed on behalf of an unrelated party in a country outside the country in which the CFC was organized. 
E) None of the above transactions. 
A) Purchase of inventory from unrelated party and sale to anyone outside the CFC country. 
B) Services performed for the U.S.parent in a country in which the CFC was organized. 
C) Purchase of inventory from a related party and sale to anyone outside the CFC country. 
D) Services reformed on behalf of an unrelated party in a country outside the country in which the CFC was organized. 
E) None of the above transactions.

Question 16

Twelve unrelated U.S.persons own a foreign corporation equally.The foreign corporation is a CFC.

Accepted Answer

A) True 
 B)False

Question 17

BlueCo,a domestic corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.BlueCo transfers $200 in inventory (basis = $20)and $900 in land (basis = $950)to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain,if any,is recognized as a result of this transaction?

Accepted Answer

A) $0. 
B) $130. 
C) $180. 
D) $230. 
E) Some other amount. 
A) $0. 
B) $130. 
C) $180. 
D) $230. 
E) Some other amount.

Question 18

BoxCo,Inc. ,a domestic corporation,owns 10% of the stock of X and of Y,two foreign corporations that are not CFCs and pay no foreign taxes.Both X and Y earn only general limitation income.During the current year,BoxCo,Inc.receives dividend income of $50,000 from X and $80,000 from Y for the tax year (all from post-2003 E & P).BoxCo's total taxable income for the current year is $730,000.Foreign withholding taxes of $49,000 ($5,000 on the X dividend and $44,000 on the Y dividend)and U.S.taxes of $248,200 (before FTC)are levied.What is BoxCo's allowed foreign tax credit?

Accepted Answer

A) $130,000. 
B) $49,000. 
C) $32,200. 
D) $44,200. 
A) $130,000. 
B) $49,000. 
C) $32,200. 
D) $44,200.

Question 19

Discuss the policy reasons for the § 367 cross-border transfer rules.Provide two examples of transactions to which § 367 would apply.

Accepted Answer

Section 367 provides for the immediate t

Question 20

An advance pricing agreement (APA)is an agreement between:

Accepted Answer

A) The taxpayer and the IRS. 
B) Two related taxpayers. 
C) Two or more governments. 
D) The IRS and U.S.taxing authorities. 
A) The taxpayer and the IRS. 
B) Two related taxpayers. 
C) Two or more governments. 
D) The IRS and U.S.taxing authorities.

Exam 25: Taxation of International Transactions

Discuss the primary purposes of income tax treaties.

Income tax treaties may provide for higher withholding tax rates on interest income than the rate provided under U.S.statutory law.

All losses are apportioned against U.S.-source income.

Dividends received from Shamrock,Ltd. ,an Irish corporation that earns 40% of its income from U.S.business activities,are foreign-source income.

U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

Generally,accrued foreign taxes are:

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

Section 482 is used to:

If a foreign corporation's U.S.effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000,its DEA is $940,000.

Which of the following would not prevent an alien without a "green card" from being classified as a U.S.resident for income tax purposes?

Without the foreign tax credit,double taxation would result when:

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

A controlled foreign corporation (CFC)realizes Subpart F income from:

Twelve unrelated U.S.persons own a foreign corporation equally.The foreign corporation is a CFC.

Discuss the policy reasons for the § 367 cross-border transfer rules.Provide two examples of transactions to which § 367 would apply.

An advance pricing agreement (APA)is an agreement between:

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