Question 1

Which of the following statements regarding the U.S. taxation of non-U.S. persons is true?

Accepted Answer

A)  Non-U.S. persons never are subject to U.S. income tax. 
B)  Non-U.S. persons are subject to U.S. income tax only on gains from U.S. real property. 
C)  Non-U.S. persons can be subject to a withholding tax on U.S.-source portfolio income. 
D)  Non-U.S. persons can be subject to a withholding tax on foreign-source portfolio income.

Question 2

A U.S. taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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

Question 4

A U.S. parent can deduct the current operating loss of a non-U.S. entity that it owns if the non-U.S. entity is operated as a:

Accepted Answer

A)  Branch. 
B)  Subsidiary. 
C)  Both a. and b. 
D)  Neither a. nor b.

Question 5

Match the definition with the correct term.
a. Expatriate 
b. Resident
c. Nonresident alien
d. U.S. trade or business 
e. Branch profits tax
f. Effectively connected income
-A non-U.S. citizen who holds a "green card."

Accepted Answer

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

Question 6

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

Accepted Answer

A)  Purchase of inventory from unrelated U.S. person and sale outside the CFC country. 
B)  Purchase of inventory from a related U.S. person and sale outside the CFC country. 
C)  Services performed for the U.S. parent in a country in which the CFC was organized. 
D)  Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized.

Question 7

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

Accepted Answer

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

Question 8

Under a territorial income tax system, a country assesses an income tax on:

Accepted Answer

A)  Income of all entities earned within its borders. 
B)  Income of its citizens earned in other countries. 
C)  Both a. and b. 
D)  Neither a. nor b.

Question 9

Which of the following statements is false in regard to the U.S. income tax treaty program?

Accepted Answer

A)  There are about 70 bilateral income tax treaties between the U.S. and other countries. 
B)  Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income. 
C)  U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language. 
D)  None of the above statements is false.

Question 10

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S.?

Accepted Answer

A)  Because the inventory is manufactured in the U.S., all of the inventory income is U.S. source. 
B)  If title passes on the inventory outside the U.S., all of the inventory income is foreign source. 
C)  The taxpayer may source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place. 
D)  The taxpayer may source one-half the income based on title passage and one-half the income based on location of production assets.

Question 11

The United States has in force income tax treaties with about 70 countries.

Accepted Answer

A) True 
 B)False

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. 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
-A CFC's profits from sales of goods and services.

Accepted Answer

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Arendt, Inc., a U.S. corporation, purchases a piece of equipment for use in its manufacture of custom pianos. The equipment is acquired in Ireland at a cost of 200,000 euros when 1€: $1.25. Payment is due in 90 days. Arendt acquires 200,000 euros and pays for the machine when 1€: $1.15. What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss, if any?

Accepted Answer

The answer of Arendt, Inc., a U.S. corporation, purchases a...

Question 15

Olaf, a citizen of Norway with no trade or business activities in the United States, sells at a gain 200 shares of MicroShift, Inc., a U.S. company. The sale takes place through Olaf's broker in Oslo. 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 foreign-source income not subject to U.S. taxation. 
C)  It is U.S.-source income subject to U.S. taxation. 
D)  It is U.S.-source income exempt from U.S. taxation.

Question 16

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.8€. Wood's exchange gain or loss is:

Accepted Answer

A)  $15,000 loss. 
B)  $15,000 gain. 
C)  $75,000 gain. 
D)  $0. There is no exchange gain or loss on a dividend distribution.

Question 17

Serena, a nonresident alien, is employed by GlobalCo, a non-U.S. corporation. Serena works in the United States for 3 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 18

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Accepted Answer

A)  Intangibles income. 
B)  Passive income. 
C)  Business income. 
D)  None of the above are separate FTC limitation baskets. 
E)  All of the above are separate FTC limitation baskets.

Question 19

Discuss the primary purposes of income tax treaties.

Accepted Answer

The answer of Discuss the primary purposes of income tax...

Question 20

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.

Accepted Answer

A) True 
 B)False

Exam 25: Taxation of International Transactions

Which of the following statements regarding the U.S. taxation of non-U.S. persons is true?

A U.S. taxpayer may take a current FTC equal to the greater of the FTC limit or the actual foreign taxes (direct or indirect) paid or accrued.

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

A U.S. parent can deduct the current operating loss of a non-U.S. entity that it owns if the non-U.S. entity is operated as a:

Match the definition with the correct term. a. Expatriate b. Resident c. Nonresident alien d. U.S. trade or business e. Branch profits tax f. Effectively connected income -A non-U.S. citizen who holds a "green card."

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

Under a territorial income tax system, a country assesses an income tax on:

Which of the following statements is false in regard to the U.S. income tax treaty program?

Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S.?

The United States has in force income tax treaties with about 70 countries.

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

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

Wood, a U.S. corporation, owns Holz, a German corporation. Wood receives a dividend (non-Subpart F income) from Holz of 75,000€. The average exchange rate for the year is $1US: 0.6€, and the exchange rate on the date of the dividend distribution is $1US: 0.8€. Wood's exchange gain or loss is:

Which of the following is a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Discuss the primary purposes of income tax treaties.

A U.S. business conducts international communications activities between the U.S. and Spain. The resulting income is sourced 100% to the U. S., the residence of the taxpayer.