Question 1

A tax haven often is:

Accepted Answer

A)   A country with high internal income taxes.
B)   A country with no or low internal income taxes.
C)   A country without income tax treaties.
D)   A country that prohibits "treaty shopping."E) A) and D)
F) A) and B)

Question 2

Dividends received from a domestic corporation are totally U.S. source:

Accepted Answer

A)   If the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a U.S. trade or business.
B)   If the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a U.S. trade or business.
C)   Unless the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business.
D)   Unless the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business.
E)   In all of the above cases.F) All of the above
G) A) and E)

Question 3

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

Accepted Answer

A) True 
 B)False

Question 4

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Accepted Answer

A)   Deducting the excess foreign taxes that do not qualify for the credit.
B)   Repatriating more foreign income to the United States in the year there is an excess limitation.
C)   Generating "same basket" foreign-source income that is subject to a tax rate higher than the U.S. tax rate.
D)   Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S. tax rate.E) C) and D)
F) All of the above

Question 5

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Accepted Answer

A)   They allow for a deferral of non-U.S.-source income from U.S. taxation.
B)   They provide certainty as to the U.S. income tax treatment of cross-border transactions.
C)   They prevent shifting of income from the U.S. to high-tax non-U.S. jurisdictions.
D)   They prevent shifting of income from the U.S. to low-tax non-U.S. jurisdictions.E) A) and D)
F) B) and C)

Question 6

Flapp Corporation, a U.S. corporation, conducts all of its transactions in the U.S. dollar. It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can. The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can. What is Flapp's exchange gain or loss on this sale?

Accepted Answer

A)   Flapp does not have a foreign currency exchange gain or loss, since it conducts all of its transactions in the U.S. dollar.
B)   Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.)  and it collects on the receivable when the exchange rate is $1US: $1.25Can. Flapp has an exchange gain of $50,000.
C)   Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.) . It collects on the receivable at $1US: $1.25Can. Flapp has an exchange loss of $5,000.
D)   Flapp's foreign currency exchange loss is $50,000.E) A) and D)
F) C) and D)

Question 7

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

Accepted Answer

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

Question 8

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

Accepted Answer

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

Question 9

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 10

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 havenF) Income tax treatyG) Section 482H) D) and F)
I) A) and B)

Question 11

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S. trade or business?

Accepted Answer

A)   Nondiscrimination tax.
B)   Windfall U.S. profits tax.
C)   Dividend repatriation tax.
D)   Branch profits tax.E) A) and B)
F) A) and C)

Question 12

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 13

GoldCo, a U.S. corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation. GoldCo transfers $200 in inventory (basis = $50)  and $900 in land (basis = $950)  to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the U.S. What gain or loss, if any, does GoldCo recognize as a result of this transaction?

Accepted Answer

A)   ($50) 
B)   $0
C)   $100
D)   $150E) All of the above
F) A) and C)

Question 14

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo'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.E) A) and C)
F) A) and D)

Question 15

Match the definition with the correct term
-Activity that creates the potential for effectively connected income.

Accepted Answer

A)  Expatriate
B)  Resident
C)  Nonresident alien
D)  U.S. trade or business
E)  Branch profits taxF) Effectively connected incomeG) E) and F)
H) B) and D)

Question 16

A domestic corporation is one whose assets are primarily located in the U.S. For this purpose, the primarily located test (>50%) applies.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A)   Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S. persons.
B)   Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S. persons.
C)   Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S. persons.
D)   Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S. persons.E) All of the above
F) C) and D)

Question 18

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)  Branch profits taxF) Effectively connected incomeG) D) and E)
H) B) and D)

Question 19

USCo, a U.S. corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Accepted Answer

A)   $200,000
B)   $300,000
C)   $10 million
D)   $15 millionE) None of the above
F) All of the above

Question 20

Winnie, Inc., a U.S. corporation, receives a dividend of $400,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Winnie elects the FTC, its gross income attributable to this dividend is $400,000.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

Correct Answer
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WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Correct Answer
verified

Dividends received from a domestic corporation are totally U.S. source:

Correct Answer
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Which of the following statements regarding income sourcing is correct?

Correct Answer
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Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S. trade or business?

Correct Answer
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Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Correct Answer
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Correct Answer
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Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

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

Correct Answer
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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.

Correct Answer
verified

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Correct Answer
verified

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.

Correct Answer
verified

Match the definition with the correct term -Activity that creates the potential for effectively connected income.

Correct Answer
verified

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

Correct Answer
verified

A tax haven often is:

Correct Answer
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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.

Correct Answer
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A domestic corporation is one whose assets are primarily located in the U.S. For this purpose, the primarily located test (>50%) applies.

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

Correct Answer
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Correct Answer
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Winnie, Inc., a U.S. corporation, receives a dividend of $400,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Winnie elects the FTC, its gross income attributable to this dividend is $400,000.

Correct Answer
verified

Exam 9: Taxation of International Transactions

Correct AnswerverifiedShow Answer

WaterCo, a domestic corporation, purchases inventory for resale from unrelated distributors outside the U.S. It resells this inventory to U.S. customers, with title passing inside the United States. What is the source of WaterCo's inventory sales income?

Correct AnswerverifiedShow Answer

Dividends received from a domestic corporation are totally U.S. source:

Correct AnswerverifiedShow Answer

Which of the following statements regarding income sourcing is correct?

Correct AnswerverifiedShow Answer

Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S. trade or business?

Correct AnswerverifiedShow Answer

Which of the following statements best describes the primary purpose of the Subpart F income provisions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Match the definition with the correct term -Activity that creates the potential for effectively connected income.

Correct AnswerverifiedShow Answer

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law, using §§ 351 and 368.

Correct AnswerverifiedShow Answer

A tax haven often is:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A domestic corporation is one whose assets are primarily located in the U.S. For this purpose, the primarily located test (>50%) applies.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Winnie, Inc., a U.S. corporation, receives a dividend of $400,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Winnie elects the FTC, its gross income attributable to this dividend is $400,000.

Correct AnswerverifiedShow Answer

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