Question 1

Luisa, a non-U.S. person with a green card, spends the following days in the United States. Year 1 360 days Year 2 210 days Year 3 30 days
Luisa's residency status for year 3 is:

Accepted Answer

A)  U.S. resident because she has a green card. 
B)  U.S. resident since she was a U.S. resident for the past immediately preceding two years. 
C)  Not a U.S. resident because Luisa was not in the United states for more than 30 days during year 3. 
D)  Not a U.S. resident since, using the three-year test, Luisa is not present in the United States for at least 183 days.

Question 2

Britta, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes as follows.
$$\begin{array} { l r r } 
&\text { Income } & \text { Taxes } \
\text { Passive category } & \$ 200,000 & \$ 10,000 \
\text { General limitation category } & 800,000 & 350,000
\end{array}$$
Britta's worldwide taxable income is $1,600,000 and U.S. taxes before FTC are $336,000 21% tax rate). What is
Britta's U.S. tax liability after the FTC?

Accepted Answer

The answer of Britta, Inc., a U.S. corporation, reports foreign-source...

Question 3

Freda was born and continues to live in Uruguay. She exports widgets to U.S. customers. The United States does not have in force an income tax treaty with Uruguay. Freda's net U.S. income from the widgets is subject to a flat
30% Federal income tax rate.

Accepted Answer

A) True 
 B)False

Question 4

Yvonne is a citizen of France 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. Current year - 150 days First prior year - 150 days Second prior year - 90 days
Is Yvonne treated as a U.S. resident for the current year?

Accepted Answer

A)  No, because Yvonne is a citizen of France. 
B)  No, because Yvonne was not present in the United States at least 183 days during the current year. 
C)  No, because although Yvonne 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. 
D)  Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years using the appropriate fractions for the prior years).

Question 5

Serena, a nonresident alien, is employed by GlobalCo, a non-U.S. corporation. She works in the United States for three days during the year, receiving a gross salary of $2,500 for this period. GlobalCo is not engaged in a U.S. trade or business. Under the commercial traveler exception, the $2,500 is not classified as U.S.-source income.

Accepted Answer

A) True 
 B)False

Question 6

Liang, an NRA, is sent to the United States by Fulston Corporation, her non-U.S. employer. She spends 50 days in the United States and earns $20,000 for a two-month period. This amount is attributable to 40 U.S. working days and
10 non-U.S. working days. Fulston does not have a United States trade or business, and Liang spends no other time in the United States for the tax year. Liang's U.S.-source taxable income is:

Accepted Answer

A)  $20,000. 
B)  $16,000. 
C)  $3,000. 
D)  $0.

Question 7

U.S. income tax treaties can be described as:

Accepted Answer

A)  Napoleonic. 
B)  Spoke-and-Wheel. 
C)  Balanced. 
D)  Bilateral.

Question 8

Which of the following is not a foreign person?

Accepted Answer

A)  A foreign corporation 51% owned by U.S. shareholders. 
B)  A foreign corporation 100% owned by a domestic corporation. 
C)  A citizen of Germany with U.S. permanent resident status i.e., green card). 
D)  A citizen of Italy who spends 14 days vacationing in the United States.

Question 9

Match the definition with the correct term.
-A business operation that accounts for profits and losses using its functional currency.

Accepted Answer

A) Inbound 
B) Outbound 
C) Allocation and apportionment 
D) Qualified business unit 
E) Tax haven
F)Income tax treaty
G)Section 482

Question 10

USCo, a U.S. 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 $315,000. What is USCo's allowed foreign tax credit?

Accepted Answer

A)  $70,000 
B)  $147,000 
C)  $315,000 
D)  $385,000

Question 11

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 sourcing 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.

Question 12

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-A CFC's profits from sales of goods and services.

Accepted Answer

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

Question 13

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

Accepted Answer

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

Question 14

Given the following information, determine whether Greta, an alien, is a U.S. resident for year 3. Greta cannot establish a tax home in or a closer connection to a foreign country.
$$\begin{array}{l}
\text { Year}&\text {  Number of Days in the United States }\
3 & 120 \
2 & 150 \
1 & 240
\end{array}$$

Accepted Answer

The answer of Given the following information, determine whether Greta,...

Question 15

The transfer of the assets of a U.S. corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

Accepted Answer

A) True 
 B)False

Question 16

Match the definition with the correct term.
-Income of foreign person taxed through filing of a U.S. tax return with deductions allowed against gross income.

Accepted Answer

A) Expatriate 
B) Resident 
C) Nonresident alien 
D) U.S. trade or business 
E) Effectively connected income

Question 17

The following persons own Schlecht Corporation, a non-U.S.entity. Jim, U.S. individual 35% Gina, U.S. individual 15% Marina, U.S. individual 8% Pedro, U.S. individual 12% Chee, non-U.S. individual 30%
None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Accepted Answer

A)  Schlecht is not a CFC. 
B)  Chee includes $90,000 in gross income. 
C)  Marina is not a U.S. shareholder for purposes of determining whether Schlecht is a CFC. 
D)  Marina includes $24,000 in gross income.

Question 18

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

Accepted Answer

The answer of In international corporate income taxation, what are...

Question 19

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

Accepted Answer

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

Question 20

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income
e.g. §§ 351 and 368.) What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Accepted Answer

The answer of The § 367 cross-border transfer rules seem...

Exam 9: Taxation of International Transactions

Luisa, a non-U.S. person with a green card, spends the following days in the United States. Year 1 360 days Year 2 210 days Year 3 30 days Luisa's residency status for year 3 is:

Freda was born and continues to live in Uruguay. She exports widgets to U.S. customers. The United States does not have in force an income tax treaty with Uruguay. Freda's net U.S. income from the widgets is subject to a flat 30% Federal income tax rate.

U.S. income tax treaties can be described as:

Which of the following is not a foreign person?

Match the definition with the correct term. -A business operation that accounts for profits and losses using its functional currency.

USCo, a U.S. 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 $315,000. What is USCo's allowed foreign tax credit?

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 sourcing of AirCo's inventory sales income?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

Given the following information, determine whether Greta, an alien, is a U.S. resident for year 3. Greta cannot establish a tax home in or a closer connection to a foreign country. $\begin{array}{l}\text { Year}&\text { Number of Days in the United States }\\3 & 120 \\2 & 150 \\1 & 240\end{array}$

The transfer of the assets of a U.S. corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

Match the definition with the correct term. -Income of foreign person taxed through filing of a U.S. tax return with deductions allowed against gross income.

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

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

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income e.g. §§ 351 and 368.) What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.