Question 1

The following persons own Schlecht Corporation, a foreign corporation.  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.
D)  Marina includes $24,000 in gross income.
E)  None of the above statements is correct.F) A) and C)
G) B) and E)

Question 2

Arendt, Inc., a domestic 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 euro: $1.35.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1 euro: $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

BlueCo, a domestic corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation.BlueCo transfers $200 in inventory (basis = $50)  and $900 in land (basis = $950)  to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain or loss, if any, is recognized as a result of this transaction?

Accepted Answer

A)  $0.
B)  ($50) .
C)  $100.
D)  $150.E) All of the above
F) C) and D)

Question 4

Britta, Inc., a U.S.corporation, reports foreign-source income and pays foreign taxes as follows.
  Britta's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume a 35% tax rate).What is Britta's U.S.tax liability after the FTC?

Accepted Answer

The FTC is computed separately for both ...

Question 5

Abbott, Inc., a domestic corporation, reports worldwide taxable income of $8 million, including a $900,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed E & P are $18 million and it has paid $12 million of foreign income taxes attributable to these earnings.What is Abbott's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Accepted Answer

A)  $0.
B)  $600,000.
C)  $900,000.
D)  $18 million.E) C) and D)
F) A) and B)

Question 6

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Accepted Answer

A)  If title passes on the inventory outside the U.S., all of the inventory income is foreign source.
B)  Because the inventory is manufactured in the U.S., all of the inventory income is U.S.source.
C)  The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets.
D)  The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place.E) None of the above
F) B) and C)

Question 7

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

Accepted Answer

A)  Foreign 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)  Foreign persons are subject to U.S.income or withholding tax only if they are engaged in a U.S.trade or business.
C)  Foreign 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 foreign person is engaged in a U.S.trade or business, the foreign person's worldwide income is subject to U.S.taxation.E) C) and D)
F) A) and C)

Question 8

Wood, a U.S.corporation owns 30% of Hout, a foreign corporation.The remaining 70% of Hout is owned by other foreign corporations not controlled by Wood.Hout's functional currency is the euro.Wood receives a 50,000€ distribution from Hout.If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1, the exchange rate at year end is .95€: $1, and on the date of the dividend payment the exchange rate is 1.1€: $1, what is Wood's tax result from the distribution?

Accepted Answer

A)  Wood receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2) ].
B)  Wood receives a dividend of $52,632 (50,000€/.95)  with no exchange gain or loss.
C)  Wood receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455) .
D)  Wood receives a dividend of $45,455 (50,000€/1.1)  with no exchange gain or loss.E) C) and D)
F) None of the above

Question 9

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States.What is the source of AirCo's inventory sales income?

Accepted Answer

A)  100% U.S.source.
B)  100% foreign source.
C)  50% U.S.source and 50% foreign source.
D)  50% foreign source and 50% sourced based on location of manufacturing assets.E) B) and C)
F) None of the above

Question 10

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 11

Copp, Inc., a domestic corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year.Included in that amount is $20 million of Subpart F income.Copp has been a CFC for the entire year and makes no distributions in the current year.Copp must include in gross income (before any § 78 gross-up) :

Accepted Answer

A)  $0.
B)  $50 million.
C)  $20 million.
D)  $6 million.E) C) and D)
F) A) and D)

Question 12

Subpart F income includes portfolio income like dividends and interest.

Accepted Answer

A) True 
 B)False

Question 13

LocalCo merges into HeirCo, a non-U.S.entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S.income tax law, using §§ 351 and 368.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A)  Dividends from foreign corporations are always foreign source.
B)  Dividends are sourced based on the residence of the recipient.
C)  Dividends from foreign corporations are foreign-source only to the extent that 80% or more of the foreign corporation's gross income for the 3 years preceding the year of the dividend payment was effectively connected with the conduct of a foreign trade or business.
D)  A percentage of dividends from foreign corporations are U.S.source to the extent that 25% or more of the foreign corporation's gross income for the 3 years preceding the year of the dividend payment was effectively connected with the conduct of a U.S.trade or business.E) A) and B)
F) A) and C)

Question 16

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) All of the above
F) None of the above

Question 17

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

Accepted Answer

A)  A foreign person's effectively connected income is subject to U.S.income taxation.
B)  A foreign person's effectively connected income is tax free unless it is portfolio income.
C)  A foreign person may earn income from U.S.real property without incurring any U.S.income tax.
D)  A foreign 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 C)
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

Freiburg, Ltd., a foreign corporation, operates a U.S.branch that reports effectively connected U.S.earnings and profits (after income taxes) of $800,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $3 million and at the end of the tax year is $2.4 million.Freiburg is organized in a nontreaty country.Compute Freiburg's branch profits tax for the year.

Accepted Answer

The branch profits tax is equal to 30% o...

Question 20

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) A) and D)

Exam 25: Taxation of International Transactions

Correct Answer
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The branch profits tax is equal to 30% o...
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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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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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Which of the following is not a foreign person?

Correct Answer
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AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States.What is the source of AirCo's inventory sales income?

Correct Answer
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Subpart F income includes portfolio income like dividends and interest.

Correct Answer
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Britta, Inc., a U.S.corporation, reports foreign-source income and pays foreign taxes as follows. Britta's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume a 35% tax rate).What is Britta's U.S.tax liability after the FTC?

Correct Answer
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The FTC is computed separately for both ...
View Answer

The following persons own Schlecht Corporation, a foreign corporation. 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 Answer
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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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LocalCo merges into HeirCo, a non-U.S.entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S.income tax law, using §§ 351 and 368.

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

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

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

Correct Answer
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Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Correct Answer
verified

Exam 25: Taxation of International Transactions

Correct AnswerverifiedThe branch profits tax is equal to 30% o...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a foreign person?

Correct AnswerverifiedShow Answer

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States.What is the source of AirCo's inventory sales income?

Correct AnswerverifiedShow Answer

Subpart F income includes portfolio income like dividends and interest.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Britta, Inc., a U.S.corporation, reports foreign-source income and pays foreign taxes as follows. Britta's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume a 35% tax rate).What is Britta's U.S.tax liability after the FTC?

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

The following persons own Schlecht Corporation, a foreign corporation. 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 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

LocalCo merges into HeirCo, a non-U.S.entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S.income tax law, using §§ 351 and 368.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S.and sold outside the U.S.is true?

Correct AnswerverifiedShow Answer

Correct Answer
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The branch profits tax is equal to 30% o...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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The FTC is computed separately for both ...
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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No foreign currency exchange gain or los...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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