Question 1

ForCo,a controlled foreign corporation,earns $500,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the unrelated companies are located in ForCo's country of incorporation.ForCo's Subpart F income for the year is:

Accepted Answer

A)  $0.
B)  $500,000.
C)  $500,000 only if ForCo is engaged in a trade or business in its home country.
D)  $500,000 only if ForCo is not engaged in a trade or business in its home country.E) A) and D)
F) C) and D)

Question 2

Which of the following persons are not typically concerned with the U.S.-sourcing rules for gross income?

Accepted Answer

A)  Foreign persons with U.S.activities.
B)  U.S.persons with foreign activities.
C)  U.S.employees working abroad.
D)  Foreign persons with only foreign activities.E) C) and D)
F) None of the above

Question 3

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 4

ForCo,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.ForCo's current year E & P is $150,000 and it's accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

Accepted Answer

A)  $18 million.
B)  $900,000.
C)  $150,000.
D)  $0.E) None of the above
F) All of the above

Question 5

U.S.income tax treaties:

Accepted Answer

A)  Provide for primary taxation with a tax credit for income sourced in one country and earned by a resident of the other treaty country.
B)  Provide for taxation exclusively by the source country.
C)  Provide that the country with the highest tax rate will be allowed exclusive tax collection.
D)  Provide for taxation exclusively by the country of residence.E) C) and D)
F) None of the above

Question 6

RainCo,a domestic corporation,owns a number of patents related to designing umbrellas.RainCo licenses these patents to unrelated parties.TexCo,a domestic corporation,paid RainCo $100,000 in royalties related to these licenses.TexCo uses the patent information in its manufacturing process in its Canadian plant.IrishCo,an Irish corporation,paid RainCo $25,000 in royalties related to the licenses.IrishCo uses the patent information in its manufacturing process in its Michigan manufacturing plant.How much foreign-source royalty income did RainCo earn from these licenses?

Accepted Answer

A)  $0.
B)  $25,000.
C)  $100,000.
D)  $125,000.E) A) and D)
F) A) and C)

Question 7

Which of the following transactions by a U.S.corporation may result in taxation under § 367.

Accepted Answer

A)  Incorporation of U.S branch as a U.S.corporation when the branch earns foreign-source income.
B)  Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation has no foreign shareholders.
C)  Incorporation of a U.S.branch as a U.S.corporation if the new U.S.corporation also has foreign shareholders.
D)  All the above.
E)  None of the above.F) B) and D)
G) A) and B)

Question 8

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)  For the most part,neither country is prohibited from taxing the income of its residents.
C)  The 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.
D)  Residence of the taxpayer is an important consideration,while the presence of a permanent establishment is not.
E)  None of the above statements is false.F) None of the above
G) A) and B)

Question 9

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) All of the above

Question 10

Scott,Inc. ,a domestic corporation,receives a dividend of $800,000 from a § 902 noncontrolled foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott,Inc.elects the FTC,its gross income attributable to this dividend is $800,000.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Sean,a citizen of Ireland with no trade or business activities in the United States,sells at a gain 200 shares of MicroSoft,Inc. ,a U.S.company.The sale takes place through Sean's broker in Dublin.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 U.S.-source income subject to U.S.taxation.
C)  It is foreign-source income not subject to U.S.taxation.
D)  It is U.S.-source income exempt from U.S.taxation.E) A) and C)
F) A) and B)

Question 14

Section 1248 applies to which of the following transactions?

Accepted Answer

A)  Sale or exchange of stock in a U.S.corporation by a foreign person.
B)  Sale or exchange of stock in a U.S.corporation by a U.S.person.
C)  Sale or exchange of stock in a controlled foreign corporation by its 100% U.S.shareholder.
D)  Sale or exchange of stock in a foreign corporation that has never been a controlled foreign corporation by a U.S.person.
E)  None of the above transactions is affected by § 1248.F) A) and E)
G) B) and E)

Question 15

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

Question 16

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

Question 17

If a foreign corporation's U.S.effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000,its DEA is $940,000.

Accepted Answer

A) True 
 B)False

Question 18

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 also characterized as FDAP 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) B) and C)
F) C) and D)

Question 19

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Accepted Answer

A) True 
 B)False

Question 20

Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

ForCo,a controlled foreign corporation,earns $500,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the unrelated companies are located in ForCo's country of incorporation.ForCo's Subpart F income for the year is:

Correct Answer
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If a foreign corporation's U.S.effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000,its DEA is $940,000.

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

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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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
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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 gross income is true?

Correct Answer
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ForCo,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.ForCo's current year E & P is $150,000 and it's accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

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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Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Correct Answer
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Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

Correct Answer
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Correct Answer
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In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Correct Answer
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Which of the following is not a foreign person?

Correct Answer
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Section 1248 applies to which of the following transactions?

Correct Answer
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Scott,Inc. ,a domestic corporation,receives a dividend of $800,000 from a § 902 noncontrolled foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott,Inc.elects the FTC,its gross income attributable to this dividend is $800,000.

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

Correct Answer
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Which of the following persons are not typically concerned with the U.S.-sourcing rules for gross income?

Correct Answer
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Which of the following transactions by a U.S.corporation may result in taxation under § 367.

Correct Answer
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U.S.income tax treaties:

Correct Answer
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Exam 9: Taxation of International Transactions

ForCo,a controlled foreign corporation,earns $500,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies.All of the unrelated companies are located in ForCo's country of incorporation.ForCo's Subpart F income for the year is:

Correct AnswerverifiedShow Answer

If a foreign corporation's U.S.effectively connected earnings for the taxable year are $900,000 and its net equity has increased by $40,000,its DEA is $940,000.

Correct AnswerverifiedShow Answer

The purpose of the deemed paid foreign tax credit is:

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

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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?

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

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

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ForCo,a controlled foreign corporation owned 100% by USCo,earned $900,000 in Subpart F income for the current year.ForCo's current year E & P is $150,000 and it's accumulated E & P is $18 million.What is the current year Subpart F deemed dividend to USCo?

Correct AnswerverifiedShow Answer

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

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Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Correct AnswerverifiedShow Answer

Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of assets in determining the proper interest apportionment.

Correct AnswerverifiedShow Answer

Which of the following is not a foreign person?

Correct AnswerverifiedShow Answer

Section 1248 applies to which of the following transactions?

Correct AnswerverifiedShow Answer

Scott,Inc. ,a domestic corporation,receives a dividend of $800,000 from a § 902 noncontrolled foreign corporation.Deemed-paid foreign taxes attributable to the dividend are $120,000.If Scott,Inc.elects the FTC,its gross income attributable to this dividend is $800,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following persons are not typically concerned with the U.S.-sourcing rules for gross income?

Correct AnswerverifiedShow Answer

Which of the following transactions by a U.S.corporation may result in taxation under § 367.

Correct AnswerverifiedShow Answer

U.S.income tax treaties:

Correct AnswerverifiedShow Answer

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