Question 1

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 2

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.E) A) and D)
F) A) and C)

Question 3

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Accepted Answer

A)   Itemized deductions.
B)   Foreign tax credit.
C)   Calculation of a U.S. person's total taxable income.
D)   Calculation of a U.S. person's deductible interest expense.E) None of the above
F) C) and D)

Question 5

Match the definition with the correct term.

Accepted Answer

The answer of Match the definition with the correct term.
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Question 6

Abbott,Inc.,a domestic corporation,reports worldwide taxable income of $8 million,including a $900,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's post-1986 undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings.What is Abbott's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Accepted Answer

A)   $0.
B)   $600,000.
C)   $900,000.
D)   $18 million.E) A) and B)
F) B) and D)

Question 7

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) A) and D)
F) B) and C)

Question 8

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A)   Everything else equal, larger foreign-source income increases the foreign tax credit limitation for U.S. persons.
B)   Everything else equal, larger foreign-source income decreases the foreign tax credit limitation for U.S. persons.
C)   Everything else equal, changing foreign-source income has no impact on the foreign tax credit limitation for U.S. persons.
D)   Everything else equal, larger U.S.-source income increases the foreign tax credit limitation for U.S. persons.E) A) and C)
F) None of the above

Question 9

Arendt,Inc.,a domestic 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 euro: $1.25.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1 euro: $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

No foreign currency exchange gain or los...

Question 10

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

Accepted Answer

A) True 
 B)False

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 dividend equivalent amount is $940,000.

Accepted Answer

A) True 
 B)False

Question 12

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.  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) .E) C) and D)
F) A) and D)

Question 13

Chang,an NRA,is employed by Fisher,Inc.,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Accepted Answer

A)   Chang has no U.S.-source income, under the commercial traveler exception.
B)   Chang has $3,000 U.S.-source income, since her foreign employer has a U.S. branch.
C)   Chang has $60,000 U.S.-source income which is exempt from U.S. taxation, since she is in the U.S. for 90 days or less.
D)   Chang has $60,000 U.S.-source income which is exempt from U.S. taxation, since she is working for a foreign employer.E) A) and D)
F) None of the above

Question 14

Match the definition with the correct term.

Accepted Answer

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

Question 15

USCo,a domestic corporation,has worldwide taxable income of $500,000,including a $100,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's post-1986 undistributed earnings and profits are $1 million and it has paid $200,000 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)   $120,000.
C)   $800,000.
D)   $20,000.E) A) and D)
F) A) and B)

Question 16

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

Accepted Answer

A)   Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S. dollars when used as a FTC on a U.S. return.
B)   Foreign taxes are translated into U.S. dollars only when such translation provides a tax benefit to the taxpayer.
C)   Translation of foreign taxes into U.S. dollars helps manage the U.S. balance of trade.
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 D)

Question 17

SunCo,a domestic corporation,owns a number of patents related to designing sunglasses.SunCo licenses these patents to unrelated parties.SpainCo,a Spanish corporation,paid SunCo $78,000 in royalties related to these licenses.SpainCo uses the patent information in its manufacturing process in its Texas plant.WiscCo,a domestic corporation,paid SunCo $32,000 in royalties related to the licenses.WiscCo uses the patent information in its manufacturing process in its German manufacturing plant.How much foreign-source royalty income did SunCo earn from these licenses?

Accepted Answer

A)   $0.
B)   $32,000.
C)   $78,000.
D)   $110,000.E) A) and C)
F) C) and D)

Question 18

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) .E) A) and B)
F) None of the above

Question 19

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

Accepted Answer

A)   Dividends from foreign corporations are always foreign source.
B)   Dividends are sourced based on the residence of the recipient.
C)   Dividends from foreign corporations are foreign-source only to the extent that 80% or more of the foreign corporation's gross income for the 3 years preceding the year of the dividend payment was effectively connected with the conduct of a foreign trade or business.
D)   A percentage of dividends from foreign corporations are U.S. source to the extent that 25% or more of the foreign corporation's gross income for the 3 years preceding the year of the dividend payment was effectively connected with the conduct of a U.S. trade or business.E) All of the above
F) B) and C)

Question 20

WaterCo,a domestic corporation,purchases inventory for resale from unrelated distributors outside the United States and resells this inventory to customers inside the United States with title passing inside the United States.What is the source of WaterCo'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) A) and D)
F) None of the above

Exam 25: Taxation of International Transactions

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

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

Correct Answer
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Correct Answer
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An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Correct Answer
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Match the definition with the correct term.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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No foreign currency exchange gain or los...
View Answer

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

Correct Answer
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Match the definition with the correct term.

Correct Answer
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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 dividend equivalent amount is $940,000.

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

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

Correct Answer
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Which of the following determinations requires knowing the amount of one's foreign-source gross income?

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

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

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

Correct Answer
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Chang,an NRA,is employed by Fisher,Inc.,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Correct Answer
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Exam 25: Taxation of International Transactions

Jokerz,a CFC of a U.S.parent,generated $80,000 of Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $80,000 in the first year and $50,000 in the second year.

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

Which of the following statements regarding income sourcing is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Correct AnswerverifiedShow Answer

Match the definition with the correct term.

Correct AnswerverifiedShow Answer

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. Is Yvonne treated as a U.S.resident for the current year?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo foreign currency exchange gain or los...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the definition with the correct term.

Correct AnswerverifiedShow Answer

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 dividend equivalent amount is $940,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Chang,an NRA,is employed by Fisher,Inc.,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Correct AnswerverifiedShow Answer

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No foreign currency exchange gain or los...
View Answer

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