Question 1

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

Question 2

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

Accepted Answer

A) True 
 B)False

Question 3

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 B)
F) C) and D)

Question 4

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 5

Hickman, Inc., a U.S. corporation, operates an unincorporated branch manufacturing operation in the United Kingdom. Hickman, Inc., reports $900,000 of taxable income from the U.K. branch on its U.S. tax return along with $1,300,000 of taxable income from its U.S. operations. Hickman paid $270,000 in U.K. income taxes related to the $900,000 in branch income. Assuming a U.S. tax rate of 35%, what is Hickman's U.S. tax liability after any allowable foreign tax credits?

Accepted Answer

A)   $0.
B)   $455,000.
C)   $500,000.
D)   $770,000.
E)   Some other amount.F) A) and B)
G) A) and C)

Question 6

Which of the following statements is false in regard to the U.S. income tax treaty program?

Accepted Answer

A)   There are over 50 income tax treaties between the U.S. and other countries.
B)   Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income.
C)   Residence of the taxpayer is an important consideration in applying tax treaties, while the presence of a permanent establishment is not.
D)   None of the above statements is false.E) A) and B)
F) None of the above

Question 7

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

Question 8

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

Accepted Answer

A) True 
 B)False  False

Question 9

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

Question 10

Scott, Inc., a domestic corporation, receives a dividend of $700,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Scott elects the FTC, its gross income attributable to this dividend is $700,000.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Collins, Inc. received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available. Its worldwide taxable income for the tax year is $500,000. U.S. tax before the FTC is $175,000. Collins' current year FTC is $87,500.

Accepted Answer

A) True 
 B)False

Question 13

Waldo, Inc., a U.S. corporation, owns 100% of Orion, Ltd., a foreign corporation. Orion earns only general basket income. During the current year, Orion paid Waldo a $5,000 dividend. The foreign tax credit associated with this dividend is $3,000. The foreign jurisdiction requires a withholding tax of 10%, so Waldo received only $4,500 in cash as a result of the dividend. What is Waldo's total U.S. gross income reported as a result of the $4,500 cash received?

Accepted Answer

A)   $8,000.
B)   $5,000.
C)   $4,500.
D)   $3,000.E) A) and D)
F) A) and C)

Question 14

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

Accepted Answer

A)   Foreign persons never are subject to U.S. income tax.
B)   Foreign persons are subject to U.S. income tax only on gains from U.S. real property.
C)   Foreign persons are subject to a withholding tax on foreign-source portfolio income.
D)   Foreign persons are subject to a withholding tax on U.S.-source portfolio income.E) None of the above
F) A) and B)

Question 15

Assuming all sales are made to unrelated customers outside the CFC's country of incorporation, which of the following types of income earned by a CFC is Subpart F income?

Accepted Answer

A)   Income from sale of property manufactured by the CFC.
B)   Income from the sale of property manufactured by a subsidiary of the CFC in the same country as the CFC.
C)   Income from the sale of property manufactured by the U.S. parent of the CFC outside the CFC's country.
D)   Income from the sale of property manufactured by an unrelated person outside the CFC's country of incorporation.E) B) and C)
F) C) and D)

Question 16

The purpose of the deemed paid foreign tax credit is:

Accepted Answer

A)   To allow foreign corporations to compete fairly with U.S. corporations doing business in the foreign jurisdiction.
B)   To allow U.S. corporations operating through foreign subsidiaries to receive a foreign tax credit for income taxes paid by their subsidiaries.
C)   To allow U.S. corporations operating through foreign branches to receive a foreign tax credit for income taxes paid by their branches.
D)   To allow U.S. corporations to compete fairly with foreign corporations doing business in the United States.E) A) and B)
F) A) and C) B

Question 17

Which of the following is not a foreign person?

Accepted Answer

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

Question 18

Liang, an NRA, is sent to the United States by Fuller Corporation, her foreign employer. She spends 50 days in the United States and earns $15,000 for a two-month period. This amount is attributable to 40 U.S. working days and 10 foreign working days. Her employer does not have a U.S. trade or business and Liang spends no other time in the U.S. for the tax year. Liang's U.S.-source taxable income is:

Accepted Answer

A)   $0.
B)   $3,000.
C)   $12,000.
D)   $15,000.E) A) and D)
F) All of the above

Question 19

Certain portfolio income items (i.e., foreign personal holding company income) is included under the tax rules as Subpart F income for controlled foreign corporations ( CFCs). What is the rationale for taxing these income items? Include two examples of foreign personal holding company income.

Accepted Answer

When a U.S. corporation operates through...

Question 20

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S. parent corporation. The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo. The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

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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B

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

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

Correct Answer
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Correct Answer
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Which of the following statements is false in regard to the U.S. income tax treaty program?

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

Correct Answer
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False

Correct Answer
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Scott, Inc., a domestic corporation, receives a dividend of $700,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Scott elects the FTC, its gross income attributable to this dividend is $700,000.

Correct Answer
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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

Collins, Inc. received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available. Its worldwide taxable income for the tax year is $500,000. U.S. tax before the FTC is $175,000. Collins' current year FTC is $87,500.

Correct Answer
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Correct Answer
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Which of the following statements regarding the U.S. taxation of foreign persons is true?

Correct Answer
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Assuming all sales are made to unrelated customers outside the CFC's country of incorporation, which of the following types of income earned by a CFC is Subpart F income?

Correct Answer
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The purpose of the deemed paid foreign tax credit is:

Correct Answer
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B

Which of the following is not a foreign person?

Correct Answer
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Correct Answer
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Certain portfolio income items (i.e., foreign personal holding company income) is included under the tax rules as Subpart F income for controlled foreign corporations ( CFCs). What is the rationale for taxing these income items? Include two examples of foreign personal holding company income.

Correct Answer
verified
When a U.S. corporation operates through...
View Answer

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S. parent corporation. The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo. The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

Correct Answer
verified

Exam 9: Taxation of International Transactions

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 AnswerverifiedB

The source of income received for the use of intangible property is the home country of the owner of the property producing the income.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is false in regard to the U.S. income tax treaty program?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

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

Scott, Inc., a domestic corporation, receives a dividend of $700,000 from a non-CFC foreign corporation. Deemed-paid foreign taxes attributable to the dividend are $120,000. If Scott elects the FTC, its gross income attributable to this dividend is $700,000.

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

Collins, Inc. received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available. Its worldwide taxable income for the tax year is $500,000. U.S. tax before the FTC is $175,000. Collins' current year FTC is $87,500.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assuming all sales are made to unrelated customers outside the CFC's country of incorporation, which of the following types of income earned by a CFC is Subpart F income?

Correct AnswerverifiedShow Answer

The purpose of the deemed paid foreign tax credit is:

Correct AnswerverifiedB

Which of the following is not a foreign person?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Certain portfolio income items (i.e., foreign personal holding company income) is included under the tax rules as Subpart F income for controlled foreign corporations ( CFCs). What is the rationale for taxing these income items? Include two examples of foreign personal holding company income.

Correct AnswerverifiedWhen a U.S. corporation operates through...View AnswerShow Answer

ForCo, a foreign corporation, purchases widgets from USCo, Inc., its U.S. parent corporation. The widgets are sold by ForCo to another unrelated foreign corporation in the same country as ForCo. The income from sale of the widgets by ForCo is not Subpart F foreign base company sales income.

Correct AnswerverifiedShow Answer

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B

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False

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

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When a U.S. corporation operates through...
View Answer

Correct Answer
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