Question 1

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

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

Using the asset method and the...

Question 4

Which of the following items of CFC income constitute foreign base company sales income?

Accepted Answer

A)  Sale of inventory property purchased from the CFC's U.S.parent company and sold to related parties within the CFC's country of incorporation.
B)  Sale of inventory property purchased from the CFC's U.S.parent company and sold to unrelated parties within the CFC's country of incorporation.
C)  Sale of inventory property purchased from the CFC's U.S.parent company and sold to related parties outside the CFC's country of incorporation.
D)  Sale of inventory property purchased from unrelated parties and sold to related parties within the CFC's country of incorporation.E) C) and D)
F) A) and B)

Question 5

Which of the following is a principle used in applying income sourcing under U.S.rules?

Accepted Answer

A)  Location of economic activity.
B)  Country with lowest tax rate.
C)  Country with highest tax rate.
D)  Potential size of allowed foreign tax credit.E) C) and D)
F) None of the above

Question 6

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) B) and C)
F) All of the above

Question 7

History,Inc. ,a domestic corporation,owns 60% of the stock of Past,Inc. ,a foreign corporation.For the current year,History receives a dividend of $50,000 from Past.Past's post-'86 E & P (after taxes)and foreign taxes are $4,000,000 and $300,000,respectively.What is History's total gross income from receipt of this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

Accepted Answer

Dividend income must be "gross...

Question 8

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Accepted Answer

A)  $25 million.
B)  $30 million.
C)  $25 million less any tax paid on U.S.income.
D)  $30 million less any tax paid on the foreign income.E) A) and C)
F) C) and D)

Question 9

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 10

There is no minimum ownership percentage required before application of the PFIC rules to a U.S.owner of a PFIC.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation?

Accepted Answer

A)  High withholding tax interest income.
B)  Passive income.
C)  General limitation income.
D)  None of the above are separate FTC limitation categories.
E)  All of the above are separate FTC limitation categories.F) B) and E)
G) B) and D)

Question 12

The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Which of the following transactions,if entered into by an NRA,is not subject to U.S.taxation?

Accepted Answer

A)  Sale of stock of a foreign corporation whose only asset is a U.S.building.
B)  Sale of a commercial building located in Houston,Texas,and owned directly by the NRA.
C)  Sale of stock of a domestic corporation whose only asset is undeveloped U.S.real estate.
D)  Sale of partnership interest.Partnership's assets are predominantly U.S.real estate.E) A) and B)
F) B) and C)

Question 15

FLCo,a U.S.corporation,has $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.FLCo's U.S.and foreign assets are as follows.

How should FLCo assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

Accepted Answer

A)  Using tax book values.
B)  Using fair market value.
C)  Using tax book value for U.S.source and fair market value for foreign source.
D)  Using fair market value for U.S.source and tax book value for foreign source.E) None of the above
F) A) and D)

Question 16

USCo,a domestic corporation,receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

Accepted Answer

A)  $245,000.
B)  $70,000.
C)  $175,000.
D)  $770,000.E) B) and C)
F) A) and C)

Question 17

Foreign-source losses within a separate limitation basket are allocated directly against U.S.-source income without regard to income in other separate limitation baskets.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Accepted Answer

A)  Purchase of inventory from a U.S.parent and sale to anyone inside the CFC country.
B)  Purchase of inventory from a U.S.parent and sale to anyone outside the CFC country.
C)  Purchase of inventory from a U.S.parent and sale to a related party outside the CFC country.
D)  Purchase of inventory from a U.S.parent and sale to a non-related party outside the CFC country.E) B) and D)
F) B) and C)

Question 19

Which of the following is not a U.S.person?

Accepted Answer

A)  Domestic corporation.
B)  Citizen of Turkey with U.S.permanent residence status (i.e. ,green card) .
C)  U.S.corporation 100% owned by a foreign corporation.
D)  Foreign corporation 100% owned by a domestic corporation.E) B) and D)
F) A) and B)

Question 20

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

$0.A controlled foreign corporation must...

Exam 9: Taxation of International Transactions

Foreign-source losses within a separate limitation basket are allocated directly against U.S.-source income without regard to income in other separate limitation baskets.

Correct Answer
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Which of the following transactions,if entered into by an NRA,is not subject to U.S.taxation?

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

Correct Answer
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Which of the following is a principle used in applying income sourcing under U.S.rules?

Correct Answer
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There is no minimum ownership percentage required before application of the PFIC rules to a U.S.owner of a PFIC.

Correct Answer
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Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation?

Correct Answer
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The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Correct Answer
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USCo,a domestic corporation,receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

Correct Answer
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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.

Correct Answer
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Using the asset method and the...
View Answer

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Correct Answer
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Correct Answer
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$0.A controlled foreign corporation must...
View Answer

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

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

Correct Answer
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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.

Correct Answer
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Which of the following is not a U.S.person?

Correct Answer
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Dividend income must be "gross...
View Answer

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Correct Answer
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Which of the following items of CFC income constitute foreign base company sales income?

Correct Answer
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Correct Answer
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Exam 9: Taxation of International Transactions

Foreign-source losses within a separate limitation basket are allocated directly against U.S.-source income without regard to income in other separate limitation baskets.

Correct AnswerverifiedShow Answer

Which of the following transactions,if entered into by an NRA,is not subject to U.S.taxation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a principle used in applying income sourcing under U.S.rules?

Correct AnswerverifiedShow Answer

There is no minimum ownership percentage required before application of the PFIC rules to a U.S.owner of a PFIC.

Correct AnswerverifiedShow Answer

Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation?

Correct AnswerverifiedShow Answer

The presence of foreign losses that offset U.S.-source income in prior years can reduce the allowed FTC for the year by reducing the FTC limitation.

Correct AnswerverifiedShow Answer

USCo,a domestic corporation,receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld.Its worldwide taxable income is $1,500,000 and its U.S.tax liability before the foreign tax credit is $525,000.What is USCo's allowed foreign tax credit?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedUsing the asset method and the...View AnswerShow Answer

Which of the following income items do not represent Subpart F income if earned by a controlled foreign corporation?

Correct AnswerverifiedShow Answer

Correct Answerverified$0.A controlled foreign corporation must...View AnswerShow Answer

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business can take effectively connected deductions against that income.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is not a U.S.person?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDividend income must be "gross...View AnswerShow Answer

GreenCo,a domestic corporation,earns $25 million of taxable income from U.S.sources and $5 million of taxable income from foreign sources.What amount of taxable income does GreenCo report on its U.S.tax return?

Correct AnswerverifiedShow Answer

Which of the following items of CFC income constitute foreign base company sales income?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Using the asset method and the...
View Answer

Correct Answer
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$0.A controlled foreign corporation must...
View Answer

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Dividend income must be "gross...
View Answer

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