Question 1

During Year 4, Josita, an NRA, receives interest income of $50,000 from Talmadge, Inc., an unrelated U.S. corporation. Considering the following facts related to Talmadge's operations, what is the sourcing of the interest income received by Josita?

Accepted Answer

Talmadge meets the 80% active foreign bu...

Question 2

Which of the following is not a foreign person?

Accepted Answer

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

Question 3

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 may be 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) None of the above
F) A) and B)

Question 4

Match the definition with the correct term.
a. Inbound
b. Outbound
c. Allocation and apportionment 
d. Qualified business unit
e. Tax haven
f. Income tax treaty 
g. Section 482
-A country with very low or no income tax.

Accepted Answer

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

Question 5

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

Accepted Answer

A)   Non-U.S. 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 non-U.S. 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 non-U.S. persons not engaged in a U.S. trade or business may be subject to a U.S. withholding tax.E) All of the above
F) A) and D)

Question 6

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Accepted Answer

A)   Jen, Kathy, Leslie, David, Ben, and Mike are all U.S. citizens.
B)   Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen.
C)   Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Ben is Mike's son. Mike is a foreign resident and citizen.
D)   Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Mike is a foreign resident and citizen.E) None of the above
F) A) and D)

Question 7

The following persons own Schlecht Corporation, a non-U.S.entity. 
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.E) C) and D)
F) B) and C)

Question 8

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
-An individual who gives up U.S. citizenship to avoid U.S. income taxes.

Accepted Answer

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

Question 9

"Inbound" and "offshore" asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

Accepted Answer

A) True 
 B)False

Question 10

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 may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S. trade or business.
B)   Non-U.S. persons are subject to U.S. income or withholding tax only if they are engaged in a U.S. trade or business.
C)   Non-U.S. persons are not taxed on gains from U.S. real property as long as such property is not used in a U.S. trade or business.
D)   Once a non-U.S. person is engaged in a U.S. trade or business, the non-U.S. person's worldwide income is subject to U.S. taxation.E) A) and B)
F) A) and C)

Question 11

Describe and diagram the timeline that most businesses use to enter the international markets.

Accepted Answer

Most businesses ente...

Question 12

ForCo, a non-U.S. corporation based in Aldonza, purchases widgets from USCo, Inc., its U.S. parent corporation.
The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza. The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 13

In creating a foreign subsidiary, to avoid current income taxation, a U.S. person should transfer ownership to the subsidiary of:

Accepted Answer

A)   Appreciated stock in another subsidiary.
B)   Appreciated inventory for the new entity to sell.
C)   Both a. and b.D) All of the above
E) A) and B)

Question 14

Match the definition with the correct term.
a. Inbound
b. Outbound
c. Allocation and apportionment 
d. Qualified business unit
e. Tax haven
f. Income tax treaty 
g. Section 482
-Treasury powers over transfer pricing.

Accepted Answer

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

Question 15

Gains on the sale of U.S. real property held directly or indirectly through U.S. stock ownership by NRAs and foreign corporations are subject to tax at capital gains rates under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   A non-U.S. person's effectively connected U.S. business income is taxed by the U.S. only if it is portfolio income.
B)   A non-U.S. person's effectively connected U.S. business income is subject to U.S. income taxation.
C)   A non-U.S. person may earn income from selling U.S. real property without incurring any U.S. income tax.
D)   A non-U.S. person must spend at least 183 days in the United States before any effectively connected income is subject to U.S. taxation.E) A) and B)
F) All of the above

Question 17

Unused foreign tax credits are carried back two years and then forward 20 years.

Accepted Answer

A) True 
 B)False

Question 18

Kipp, a U.S. shareholder under the CFC provisions, owns 40% of a CFC. If the CFC's Subpart F income for the taxable year is $200,000, Kipp is taxed on receipt of a constructive dividend of $80,000.

Accepted Answer

A) True 
 B)False

Question 19

Luisa, a non-U.S. person with a green card, spends the following days in the United States. 
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.E) A) and B)
F) All of the above

Question 20

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Accepted Answer

A) True 
 B)False

Exam 25: Taxation of International Transactions

Describe and diagram the timeline that most businesses use to enter the international markets.

Correct AnswerverifiedMost businesses ente...View AnswerShow Answer

"Inbound" and "offshore" asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Kipp, a U.S. shareholder under the CFC provisions, owns 40% of a CFC. If the CFC's Subpart F income for the taxable year is $200,000, Kipp is taxed on receipt of a constructive dividend of $80,000.

Correct AnswerverifiedShow Answer

Which of the following is not a foreign person?

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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 -An individual who gives up U.S. citizenship to avoid U.S. income taxes.

Correct AnswerverifiedShow Answer

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

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During Year 4, Josita, an NRA, receives interest income of $50,000 from Talmadge, Inc., an unrelated U.S. corporation. Considering the following facts related to Talmadge's operations, what is the sourcing of the interest income received by Josita?

Correct AnswerverifiedTalmadge meets the 80% active foreign bu...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In which of the following independent situations would Slane, a foreign corporation, be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike.

Correct AnswerverifiedShow Answer

Match the definition with the correct term. a. Inbound b. Outbound c. Allocation and apportionment d. Qualified business unit e. Tax haven f. Income tax treaty g. Section 482 -A country with very low or no income tax.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Unused foreign tax credits are carried back two years and then forward 20 years.

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. Inbound b. Outbound c. Allocation and apportionment d. Qualified business unit e. Tax haven f. Income tax treaty g. Section 482 -Treasury powers over transfer pricing.

Correct AnswerverifiedShow Answer

In creating a foreign subsidiary, to avoid current income taxation, a U.S. person should transfer ownership to the subsidiary of:

Correct AnswerverifiedShow Answer

Gains on the sale of U.S. real property held directly or indirectly through U.S. stock ownership by NRAs and foreign corporations are subject to tax at capital gains rates under FIRPTA.

Correct AnswerverifiedShow Answer

The following persons own Schlecht Corporation, a non-U.S.entity. 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?

Correct AnswerverifiedShow Answer

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Correct AnswerverifiedShow Answer

ForCo, a non-U.S. corporation based in Aldonza, purchases widgets from USCo, Inc., its U.S. parent corporation. The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza. The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Correct AnswerverifiedShow Answer

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Talmadge meets the 80% active foreign bu...
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