Question 1

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)   A foreign country taxes the foreign-source income of a nonresident alien.
C)   The United States and a foreign country both tax the foreign-source income of a U.S. resident.
D)   Terms of a tax treaty assign income taxing rights to the United States.E) C) and D)
F) All of the above

Question 2

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

No foreign currency exchange gain or los...

Question 3

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income (e.g. §§ 351 and 368.) What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Accepted Answer

Section 367 provides for the immediate t...

Question 4

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-A CFC's profits from sales of goods and services.

Accepted Answer

A)  Foreign base company income
B)  Foreign personal holding company income
C)  Controlled foreign corporation
D)  U.S. shareholder
E)  Previously taxed incomeF) More than 10 percentG) More than 50 percentH) More than 80 percentI) D) and E)
J) A) and F)

Question 5

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 D)

Question 6

ForCo, a foreign corporation not engaged in a U.S. trade or business, recognizes a $3 million gain from the sale of land located in the United States. The amount realized on the sale was $50 million. Absent any exceptions, what is the required withholding amount on the part of the purchaser of this land?

Accepted Answer

A)   $0
B)   $300,000
C)   $3 million
D)   $5 millionE) A) and B)
F) A) and C)

Question 7

SunCo, a U.S. 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 Germany manufacturing plant. How much U.S.-source royalty income did SunCo earn from these licenses?

Accepted Answer

A)   $0
B)   $32,000
C)   $78,000
D)   $110,000E) All of the above
F) None of the above

Question 8

An advance pricing agreement (APA)  is used between:

Accepted Answer

A)   Two or more governments.
B)   Two related taxpayers.
C)   The taxpayer and the IRS.
D)   The IRS and non- U.S. non-taxing authorities.E) All of the above
F) C) and D)

Question 9

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 an 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) A) and D)
F) B) and D)

Question 10

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

Accepted Answer

A)   Because the inventory is manufactured in the United States, all of the inventory income is U.S. source.
B)   If title passes on the inventory outside the United States, 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.E) B) and C)
F) A) and D)

Question 11

Match the definition with the correct term.
-Treasury powers over transfer pricing.

Accepted Answer

A)  Inbound
B)  Outbound
C)  Allocation and apportionment
D)  Qualified business unit
E)  Tax havenF) Income tax treaty G)  Section 482H) F) and G)
I) D) and E)

Question 12

Britta, Inc., a U.S. corporation, reports foreign-source income and pays foreign taxes as follows. $\begin{array}{lrc} 
& \text { Income } & \text { Taxes } \
\text { Passive category } & \$ 200,000 & \$ 10,000 \
\text { General limitation category } & 800,000 & 350,000
\end{array}$ Britta's worldwide taxable income is $1,600,000 and U.S. taxes before FTC are $336,000 (21% tax rate). What is
Britta's U.S. tax liability after the FTC?

Accepted Answer

The FTC is computed separately for each ...

Question 13

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

Accepted Answer

A)   Dividends are sourced based on the residence of the recipient.
B)   Dividends from a U.S. corporation are U.S.-source based on the percentage of U.S.-source income earned by the U.S. payor.
C)   Dividends from a U.S. corporation are U.S. source without regard to where the U.S. corporation generated the E & P.
D)   Dividends from a U.S. corporation are foreign-source based on the percentage of foreign-source income earned by the U.S. payor.E) A) and B)
F) B) and C)

Question 14

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

Accepted Answer

A)  Foreign base company income
B)  Foreign personal holding company income
C)  Controlled foreign corporation
D)  U.S. shareholder
E)  Previously taxed incomeF) More than 10 percentG) More than 50 percentH) More than 80 percentI) B) and C)
J) A) and H)

Question 15

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Accepted Answer

A) True 
 B)False

Question 16

Jokerz, a CFC of a U.S. parent, generated $80,000 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 $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

Accepted Answer

A) True 
 B)False

Question 17

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

Accepted Answer

A)   FIRPTA gains.
B)   Capital gains effectively connected with a U.S. trade or business.
C)   Net long-term capital gains for which no U.S. trade or business exists.
D)   Interest income effectively connected with a U.S. trade or business.E) A) and D)
F) C) and D)

Question 18

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Accepted Answer

A)   Real property taxes.
B)   Value added taxes.
C)   Sales taxes.
D)   Dividend withholding taxes.E) A) and B)
F) A) and C)

Question 20

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

Accepted Answer

A)   Services income.
B)   Passive income.
C)   Business income.
D)   None of these are separate FTC limitation baskets.
E)   All of these are separate FTC limitation baskets.F) B) and E)
G) C) and D)

Exam 25: Taxation of International Transactions

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

Correct Answer
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Correct Answer
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Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

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. -Treasury powers over transfer pricing.

Correct Answer
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Which of the following statements is true, concerning the sourcing of income from inventory produced by the taxpayer in the United States and sold outside the United States?

Correct Answer
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The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Correct Answer
verified

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Correct Answer
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An advance pricing agreement (APA) is used between:

Correct Answer
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Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

Correct Answer
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The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

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

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

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

Correct Answer
verified

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income (e.g. §§ 351 and 368.) What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Correct Answer
verified
Section 367 provides for the immediate t...
View Answer

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The FTC is computed separately for each ...
View Answer

Exam 25: Taxation of International Transactions

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

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. -Treasury powers over transfer pricing.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Correct AnswerverifiedShow Answer

Which of the following foreign taxes paid by a U.S. corporation may be eligible for the foreign tax credit?

Correct AnswerverifiedShow Answer

An advance pricing agreement (APA) is used between:

Correct AnswerverifiedShow Answer

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

Correct AnswerverifiedShow Answer

The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.

Correct AnswerverifiedShow Answer

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

Twenty unrelated U.S. persons equally own all of the stock of Quigley, a foreign corporation. Quigley is a CFC.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income (e.g. §§ 351 and 368.) What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Correct AnswerverifiedSection 367 provides for the immediate t...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe FTC is computed separately for each ...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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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
verified

Correct Answer
verified

Correct Answer
verified
Section 367 provides for the immediate t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
The FTC is computed separately for each ...
View Answer