Question 1

Shannon,a foreign person with a green card,spends the following days in the United States.

Shannon's residency status for 2008 is:

Accepted Answer

A)  She is a U.S. resident since she was a U.S. resident for the past immediately preceding two years.
B)  She is a U.S. resident because she has a green card.
C)  She is not a U.S. resident because she was not in the United states for at least 31 days during 2008.
D)  She is not a U.S. resident since, using the three-year test, she is not present in the United states for at least 183 days.
E)  None of the above. B

Question 2

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.
E)  None of the above. C

Question 3

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  True

Question 4

ForCo,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.ForCo's current year E & P is $150,000 and it's accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

Accepted Answer

A)  $18 million.
B)  $900,000.
C)  $150,000.
D)  $0.
E)  None of the above.

Question 5

Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 6

Collins,Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.Its U.S.tax before FTC is $175,000.Collins' current year FTC is $87,500.

Accepted Answer

A) True 
 B)False

Question 7

ForCo,a foreign corporation not engaged in a U.S.trade or business,recognizes a $3 million gain from the sale of land located in the United States.The amount realized on the sale was $50 million.Absent any exceptions,what is the required withholding amount on the part of the purchaser of this land?

Accepted Answer

A)  $0.
B)  $300,000.
C)  $3 million.
D)  $5 million.
E)  $50 million.

Question 8

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 FTC?

Accepted Answer

A)  $130,000.
B)  $49,000.
C)  $32,200.
D)  $44,200.
E)  None of the above.

Question 9

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.

Question 10

A nonresident alien realizes a gain on the sale of commercial real estate located in Cleveland,Ohio.The real estate was sold to his cousin who is also a nonresident alien.The seller has foreign-source income from the sale because the seller is a foreign resident.

Accepted Answer

A) True 
 B)False

Question 11

The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates:

Accepted Answer

A)  Capital gains effectively connected with a U.S. trade or business.
B)  FIRPTA gains.
C)  Fixed, determinable, annual or periodic income effectively connected with a U.S. trade or business.
D)  Income from sale of inventory where title passes in the United States, but no U.S. trade or business exists.
E)  None of the above.

Question 12

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 13

Sean,a citizen of Ireland with no trade or business activities in the United States,sells at a gain 200 shares of MicroSoft,Inc.,a U.S.company.The sale takes place through Sean's broker in Dublin.How is this gain treated for U.S.tax purposes?

Accepted Answer

A)  It is foreign-source income subject to U.S. taxation.
B)  It is U.S.-source income subject to U.S. taxation.
C)  It is foreign-source income not subject to U.S. taxation.
D)  It is U.S.-source income exempt from U.S. taxation.
E)  None of the above.

Question 14

Austin,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross income.Austin's assets (tax book value)are as follows.
  
Austin incurs interest expense of $180,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Accepted Answer

The answer of Austin,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross...

Question 15

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

The answer of KeenCo,a domestic corporation,is the sole shareholder of...

Question 16

Match the definition with the correct term.
a.Foreign base company income
b.Foreign personal holding company income
c.U.S. shareholder
d.Previously taxed income
e.De minimis rule
f.Passive foreign investment company
-Earnings already taxed to a U.S.shareholder of a controlled foreign corporation.

Accepted Answer

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

Question 17

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 18

A U.S.corporation receives a $200,000 dividend from a 20% owned foreign corporation.The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000.The U.S.corporation's U.S.tax liability before FTC is $350,000,the gross dividend income is $240,000,and worldwide taxable income is $1 million.The U.S.corporation's FTC for the taxable year is equal to:

Accepted Answer

A)  $70,000.
B)  $40,000.
C)  $30,000.
D)  $84,000.
E)  None of the above.

Question 19

ForCo,a foreign corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 20

In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?

Accepted Answer

A)  The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Mike is a foreign resident and citizen.
B)  The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen.
C)  The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Ben is Mike's son. Mike is a foreign resident and citizen.
D)  The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, Ben, and Mike are all U.S. citizens.
E)  None of the above.

Exam 9: Taxation of International Transactions

Shannon,a foreign person with a green card,spends the following days in the United States. Shannon's residency status for 2008 is:

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?

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.

ForCo,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.ForCo's current year E & P is $150,000 and it's accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

Collins,Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.Its U.S.tax before FTC is $175,000.Collins' current year FTC is $87,500.

ForCo,a foreign corporation not engaged in a U.S.trade or business,recognizes a $3 million gain from the sale of land located in the United States.The amount realized on the sale was $50 million.Absent any exceptions,what is the required withholding amount on the part of the purchaser of this land?

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

A nonresident alien realizes a gain on the sale of commercial real estate located in Cleveland,Ohio.The real estate was sold to his cousin who is also a nonresident alien.The seller has foreign-source income from the sale because the seller is a foreign resident.

The following income of a foreign corporation is not subject to the regular U.S.corporate income tax rates:

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.

Sean,a citizen of Ireland with no trade or business activities in the United States,sells at a gain 200 shares of MicroSoft,Inc.,a U.S.company.The sale takes place through Sean's broker in Dublin.How is this gain treated for U.S.tax purposes?

Austin,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross income.Austin's assets (tax book value)are as follows. Austin incurs interest expense of $180,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Match the definition with the correct term. a.Foreign base company income b.Foreign personal holding company income c.U.S. shareholder d.Previously taxed income e.De minimis rule f.Passive foreign investment company -Earnings already taxed to a U.S.shareholder of a controlled foreign corporation.

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

ForCo,a foreign corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is foreign base company sales income.

In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?