Question 1

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 C)
F) C) and D)

Question 2

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Accepted Answer

A)  $35,000.
B)  $30,000.
C)  $5,000.
D)  $95,000.E) B) and C)
F) C) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

"Inbound" and "offshore" transfers are exempt from taxation under § 367.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S.dollars when used as a FTC on a U.S.return.
B)  Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer.
C)  Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade.
D)  Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States.E) A) and B)
F) A) and C)

Question 9

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 10

USCo,a domestic corporation,purchases inventory for resale from distributors within the U.S.and resells this inventory to customers outside the U.S.with title passing outside the U.S.What is the source of the USCo'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) A) and D)
F) All of the above

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) C) and E)
G) A) and E)

Question 12

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) None of the above
F) All of the above

Question 13

During the current year,USACo (a domestic corporation) sold equipment to FrenchCo,a foreign corporation,for $350,000,with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $90,000 of depreciation deductions on the equipment,all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $10,000 on the date of sale.What is the source of the $340,000 gain on the sale of this equipment?

Accepted Answer

A)  $250,000 U.S.source and $90,000 foreign source.
B)  $250,000 foreign source and $90,000 U.S.source.
C)  $340,000 foreign source.
D)  $340,000 U.S.source.E) All of the above
F) None of the above

Question 14

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A)  Everything else equal,larger foreign-source income increases the foreign tax credit limitation for U.S.persons.
B)  Everything else equal,larger foreign-source income decreases the foreign tax credit limitation for U.S.persons.
C)  Everything else equal,changing foreign-source income has no impact on the foreign tax credit limitation for U.S.persons.
D)  Everything else equal,larger U.S.-source income increases the foreign tax credit limitation for U.S.persons.E) A) and B)
F) A) and C)

Question 16

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

Accepted Answer

A)  Repatriating more foreign income to the United States in the year there is an excess limitation.
B)  Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S.tax rate.
C)  Deducting the excess foreign taxes.
D)  a. ,b. ,and c.E) A) and B)
F) A) and C)

Question 17

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Accepted Answer

A) True 
 B)False

Question 18

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...

Question 19

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

Accepted Answer

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

Question 20

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 C)
F) A) and C)

Exam 25: Taxation of International Transactions

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Correct Answer
verified

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

Correct Answer
verified

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

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

Correct Answer
verified

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

Correct Answer
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Correct Answer
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"Inbound" and "offshore" transfers are exempt from taxation under § 367.

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

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

Correct Answer
verified

The purpose of the deemed paid foreign tax credit is:

Correct Answer
verified

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Correct Answer
verified

Which of the following statements regarding income sourcing is correct?

Correct Answer
verified

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Correct Answer
verified

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

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

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Correct Answer
verified

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

Correct Answer
verified

Exam 25: Taxation of International Transactions

The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Inbound" and "offshore" transfers are exempt from taxation under § 367.

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

The purpose of the deemed paid foreign tax credit is:

Correct AnswerverifiedShow Answer

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach because only income earned within the U.S.border is subject to taxation.

Correct AnswerverifiedShow Answer

Which of the following statements regarding income sourcing is correct?

Correct AnswerverifiedShow Answer

USCo,a domestic corporation,receives $100,000 of foreign-source passive income on which foreign taxes of $5,000 are withheld.Its worldwide taxable income is $700,000 and its U.S.tax liability before the foreign tax credit is $245,000.What is USCo's allowed foreign tax credit?

Correct AnswerverifiedShow Answer

A U.S.corporation may be able to alleviate the problem of excess foreign taxes by:

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

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 specific separate income category for purposes of the foreign tax credit limitation calculation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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