Question 1

Amber,Inc.,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Accepted Answer

A)   $225,000.
B)   $150,000.
C)   $33,750.
D)   $22,500.E) All of the above
F) C) and D)

Question 2

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo has historically earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

Accepted Answer

A)   $0.
B)   $10,500.
C)   $39,500.
D)   $50,000.E) C) and D)
F) A) and C)

Question 3

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) None of the above
F) A) and D)

Question 4

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

Accepted Answer

A)   All else equal, a U.S. corporation prefers that more of its U.S. taxable income be characterized as foreign source, to increase its foreign tax credit limitation.
B)   All else equal, a U.S. corporation prefers that less of its U.S. taxable income be characterized as foreign-source, to increase its foreign tax credit limitation.
C)   All trade or business income earned by a U.S. corporation is treated as U.S.-source income.
D)   All investment income earned by a U.S. corporation is treated as U.S.-source income.E) B) and D)
F) B) and C)

Question 5

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, without regard to whether the U.S. corporation is an 80-20 company.
C)   Dividends from a U.S. corporation are foreign-source, if the U.S. corporation is an 80-20 company.
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) B) and D)
F) A) and B)

Question 6

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 7

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 8

Ridge,Inc.,a domestic corporation,reports worldwide taxable income of $800,000,including a $300,000 dividend from Emma,Inc.,a foreign corporation.Ridge's U.S.tax liability before FTC is $280,000.Ridge owns 20% of Emma.Emma's post-1986 E & P after taxes is $8 million and it has paid foreign taxes of $4 million attributable to that E & P.If Ridge elects the FTC,its U.S.gross income with regard to the dividend from Emma is:

Accepted Answer

A)   $450,000.
B)   $300,000.
C)   $90,000.
D)   $60,000.E) A) and B)
F) A) and C)

Question 9

Which of the following statements best describes the purpose of § 482,under which the Treasury can reallocate income and deductions among related taxpayers?

Accepted Answer

A)   To provide tax benefits to U.S. multinationals that export U.S. produced property.
B)   To allow the IRS to select the best method for determining transfer prices for U.S. taxpayers.
C)   To alleviate double taxation problems generated by related entities doing business in two or more countries.
D)   To place a controlled entity on a tax parity with an uncontrolled entity with regard to prices charged by the entities.E) None of the above
F) B) and D)

Question 10

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Accepted Answer

A)   $100,000.
B)   $28,000.
C)   $18,000.
D)   $0.E) B) and D)
F) A) and C)

Question 11

Waltz,Inc.,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

Accepted Answer

A) True 
 B)False

Question 12

The United States has income tax treaties with only members of the European Union.

Accepted Answer

A) True 
 B)False

Question 13

Olaf,a citizen of Norway with no trade or business activities in the United States,sells at a gain 200 shares of MicroShift,Inc.,a U.S.company.The sale takes place through Olaf's broker in Oslo.How is this gain treated for U.S.tax purposes?

Accepted Answer

A)   It is foreign-source income subject to U.S. taxation.
B)   It is foreign-source income not subject to U.S. taxation.
C)   It is U.S.-source income subject to U.S. taxation.
D)   It is U.S.-source income exempt from U.S. taxation.E) A) and B)
F) All of the above

Question 14

Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S.parent and sale to:

Accepted Answer

A)   Anyone inside the CFC country.
B)   Anyone outside the CFC country.
C)   A related party outside the CFC country.
D)   A non-related party outside the CFC country.E) C) and D)
F) All of the above

Question 15

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 16

Gain or loss on the exchange of foreign currency is considered separately from the underlying transaction (e.g.,the purchase or sale of goods).

Accepted Answer

A) True 
 B)False

Question 17

Magdala is a citizen of Italy 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 Magdala treated as a U.S.resident for the current year?

Accepted Answer

A)   Yes, because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years (using the appropriate fractions for the prior years) .
B)   No, because Magdala is a citizen of Italy.
C)   No, because Magdala was not present in the United States at least 183 days during the current year.
D)   No, because although Magdala 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.E) A) and B)
F) A) and C)

Question 18

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Accepted Answer

A) True 
 B)False

Question 19

During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc.,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Accepted Answer

Collins meets the 80% active foreign bus...

Question 20

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 not taxed on receipt of a constructive dividend of $80,000 because he doesn't own more than 50% of the CFC.

Accepted Answer

A) True 
 B)False

Exam 25: Taxation of International Transactions

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
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Waltz,Inc.,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

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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Amber,Inc.,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Correct Answer
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ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo has historically earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

Correct Answer
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The United States has income tax treaties with only members of the European Union.

Correct Answer
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ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Correct Answer
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Correct Answer
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During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc.,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Correct Answer
verified
Collins meets the 80% active foreign bus...
View 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 Answer
verified
Section 367 provides for the immediate t...
View Answer

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

Correct Answer
verified

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
verified

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 not taxed on receipt of a constructive dividend of $80,000 because he doesn't own more than 50% of the CFC.

Correct Answer
verified

Gain or loss on the exchange of foreign currency is considered separately from the underlying transaction (e.g.,the purchase or sale of goods).

Correct Answer
verified

Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S.parent and sale to:

Correct Answer
verified

Olaf,a citizen of Norway with no trade or business activities in the United States,sells at a gain 200 shares of MicroShift,Inc.,a U.S.company.The sale takes place through Olaf's broker in Oslo.How is this gain treated for U.S.tax purposes?

Correct Answer
verified

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements best describes the purpose of § 482,under which the Treasury can reallocate income and deductions among related taxpayers?

Correct Answer
verified

Correct Answer
verified

Exam 25: Taxation of International Transactions

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

Waltz,Inc.,a U.S.taxpayer,pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.Waltz's worldwide taxable income is $450,000,on which it owes U.S.taxes of $157,500 before FTC.Waltz's FTC is $50,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Amber,Inc.,a domestic corporation receives a $150,000 cash dividend from Starke,Ltd.Amber owns 15% of Starke.Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Correct AnswerverifiedShow Answer

ForCo,a foreign corporation,receives interest income of $50,000 from USCo,an unrelated domestic corporation.USCo has historically earned 79% of its gross income from active foreign-source business income.What amount of ForCo's interest income is U.S.-source?

Correct AnswerverifiedShow Answer

The United States has income tax treaties with only members of the European Union.

Correct AnswerverifiedShow Answer

ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 85% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During 2012,Martina,an NRA,receives interest income of $50,000 from Collins,Inc.,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Correct AnswerverifiedCollins meets the 80% active foreign bus...View AnswerShow 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

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

Correct AnswerverifiedShow 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

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 not taxed on receipt of a constructive dividend of $80,000 because he doesn't own more than 50% of the CFC.

Correct AnswerverifiedShow Answer

Gain or loss on the exchange of foreign currency is considered separately from the underlying transaction (e.g.,the purchase or sale of goods).

Correct AnswerverifiedShow Answer

Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S.parent and sale to:

Correct AnswerverifiedShow Answer

Olaf,a citizen of Norway with no trade or business activities in the United States,sells at a gain 200 shares of MicroShift,Inc.,a U.S.company.The sale takes place through Olaf's broker in Oslo.How is this gain treated for U.S.tax purposes?

Correct AnswerverifiedShow Answer

The U.S.system for taxing income earned inside its borders by non-U.S.persons is referred to as inbound taxation because such foreign persons are earning income by coming into the United States.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements best describes the purpose of § 482,under which the Treasury can reallocate income and deductions among related taxpayers?

Correct AnswerverifiedShow Answer

Magdala is a citizen of Italy 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 Magdala treated as a U.S.resident for the current year?

Correct AnswerverifiedShow Answer

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Collins meets the 80% active foreign bus...
View Answer

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

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