Question 1

Overseas business activities conducted by U.S.corporations receive which one of the following favorable tax breaks?

Accepted Answer

A) Foreign subsidiaries of U.S.corporations are exempt from the U.S.corporate income tax unless they earn U.S.-source investment or trade or business income. 
B) Foreign subsidiaries of U.S.corporations are always exempt from the U.S.corporate income tax even if they earn U.S.-source investment or trade or business income. 
C) Domestic corporations conducting business in a foreign country through a branch office or facility can exempt non-U.S.income from the U.S.corporate income tax. 
D) All of the above are correct. 
A) Foreign subsidiaries of U.S.corporations are exempt from the U.S.corporate income tax unless they earn U.S.-source investment or trade or business income. 
B) Foreign subsidiaries of U.S.corporations are always exempt from the U.S.corporate income tax even if they earn U.S.-source investment or trade or business income. 
C) Domestic corporations conducting business in a foreign country through a branch office or facility can exempt non-U.S.income from the U.S.corporate income tax. 
D) All of the above are correct. A

Question 2

Identify which of the following statements is false.

Accepted Answer

A) An accrual-basis taxpayer must make an adjustment to their foreign tax credit which reflects the change in exchange rates between the accrual date and the payment date. 
B) Dividend income received by a U.S.individual from a foreign corporation earning nearly all of its income from outside the United States is foreign-source income. 
C) Income from the sale of personal property (other than inventory)by a U.S.resident is considered earned in the country where the personal property is delivered. 
D) Itemized deductions are allocated between U.S.and foreign-source income. 
A) An accrual-basis taxpayer must make an adjustment to their foreign tax credit which reflects the change in exchange rates between the accrual date and the payment date. 
B) Dividend income received by a U.S.individual from a foreign corporation earning nearly all of its income from outside the United States is foreign-source income. 
C) Income from the sale of personal property (other than inventory)by a U.S.resident is considered earned in the country where the personal property is delivered. 
D) Itemized deductions are allocated between U.S.and foreign-source income. C

Question 3

U.S.citizen Patrick is a bona fide resident of a foreign country for all of the current year.Patrick uses a calendar year as his tax year.He has $100,000 of self-employment income and incurs $20,000 in housing expenses.The base housing cost amount is $16,624.The deduction for housing expenses is

Accepted Answer

A) $16,624 for AGI. 
B) $16,624 from AGI. 
C) $3,376 for AGI. 
D) $6,816 from AGI. 
A) $16,624 for AGI. 
B) $16,624 from AGI. 
C) $3,376 for AGI. 
D) $6,816 from AGI. C

Question 4

Identify which of the following statements is true.

Accepted Answer

A) Foreign-based company sales income is earned when personal property is purchased by a Country X controlled foreign corporation (CF
C) from its U.S.parent corporation and is sold to unrelated persons in Country Z. 
B) Section 482 permits the IRS to restructure transactions between related parties as if the transactions were conducted at arm's length. 
C) One tax avoidance practice which Sec.482 attempts to prevent is the transfer of tangible property to a foreign subsidiary at a price which is below the arm's-length price that would be used by unrelated parties. 
D) All of the above are true. 
A) Foreign-based company sales income is earned when personal property is purchased by a Country X controlled foreign corporation (CF
C) from its U.S.parent corporation and is sold to unrelated persons in Country Z. 
B) Section 482 permits the IRS to restructure transactions between related parties as if the transactions were conducted at arm's length. 
C) One tax avoidance practice which Sec.482 attempts to prevent is the transfer of tangible property to a foreign subsidiary at a price which is below the arm's-length price that would be used by unrelated parties. 
D) All of the above are true.

Question 5

U.S.citizen Barry is a bona fide resident of a foreign country for all of 2018.Barry uses a calendar year as his tax year and receives $158,000 in salary and allowances from his employer.Included in the $158,000 is a $25,000 housing allowance.Barry's housing costs are $30,000.The base housing amount for the current year is $16,624.What amount related to his housing can Barry exclude on his Form 2555?

Accepted Answer

A) $13,376 
B) $25,000 
C) $30,000 
D) $14,545 
A) $13,376 
B) $25,000 
C) $30,000 
D) $14,545

Question 6

For the foreign credit limitation calculation,income derived from the sale of inventory which is produced by the seller,is considered earned

Accepted Answer

A) where production occurs. 
B) where the sale occurs. 
C) where the seller is a resident. 
D) every country of manufacture on a pro-rata allocation basis. 
A) where production occurs. 
B) where the sale occurs. 
C) where the seller is a resident. 
D) every country of manufacture on a pro-rata allocation basis.

Question 7

Identify which of the following statements is true.

Accepted Answer

A) Foreign taxes paid in excess of the foreign tax credit limitation can be carried back to the previous three tax years and then carried over to the succeeding five tax years. 
B) When a taxpayer reports excess foreign tax credits in more than one year,the excess credits are used in a last-in-first-out (LIFO)manner. 
C) Dividends generally are considered to be earned in the distributing corporation's country of incorporation. 
D) All of the above are false. 
A) Foreign taxes paid in excess of the foreign tax credit limitation can be carried back to the previous three tax years and then carried over to the succeeding five tax years. 
B) When a taxpayer reports excess foreign tax credits in more than one year,the excess credits are used in a last-in-first-out (LIFO)manner. 
C) Dividends generally are considered to be earned in the distributing corporation's country of incorporation. 
D) All of the above are false.

Question 8

Karen,a U.S.citizen,earns $40,000 of taxable income from U.S.sources,$20,000 in taxable wages from Country A and $20,000 in taxable interest from Country B.The U.S.tax rate is 21%.The tax on Country A income is $8,000,and Country B charges no tax on the interest income.Assuming only a single basket is required,Karen's foreign tax credit that can be claimed is

Accepted Answer

A) $5,000. 
B) $8,000. 
C) $10,000. 
D) none of the above. 
A) $5,000. 
B) $8,000. 
C) $10,000. 
D) none of the above.

Question 9

A nonresident alien earns $10,000 of dividends from a domestic corporation,which is the alien's only U.S.source income.Which one of the following statements is incorrect?

Accepted Answer

A) The nonresident alien's U.S.tax rate is 30% unless reduced by a tax treaty. 
B) The domestic corporation must withhold the U.S.taxes from the alien's dividend payment. 
C) The 30% tax rate is applied against gross income. 
D) The nonresident alien must pay estimated taxes on the dividend income at a 30% rate. 
A) The nonresident alien's U.S.tax rate is 30% unless reduced by a tax treaty. 
B) The domestic corporation must withhold the U.S.taxes from the alien's dividend payment. 
C) The 30% tax rate is applied against gross income. 
D) The nonresident alien must pay estimated taxes on the dividend income at a 30% rate.

Question 10

Excess foreign tax credits can be carried back one year and forward five years.

Accepted Answer

A) True 
 B)False

Question 11

A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S.citizen or a resident alien on the last day of the tax year and both spouses consent.

Accepted Answer

A) True 
 B)False

Question 12

U.S.citizens and resident aliens working abroad may qualify for the foreign-earned income exclusion of $105,900 in 2019.

Accepted Answer

A) True 
 B)False

Question 13

U.S.shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Accepted Answer

A) True 
 B)False

Question 14

Pedro,a nonresident alien,licenses a patent to a U.S.company for an $11 per unit fee for each unit produced.As a result of receiving the fee,Pedro must recognize the fee as

Accepted Answer

A) ordinary income taxable in the United States. 
B) capital gain taxable in the United States. 
C) no gain or income taxed in the United States. 
D) a portion of the gain,depending on the number of days Pedro is physically present in the United States during the current year. 
A) ordinary income taxable in the United States. 
B) capital gain taxable in the United States. 
C) no gain or income taxed in the United States. 
D) a portion of the gain,depending on the number of days Pedro is physically present in the United States during the current year.

Question 15

Define the term "nonresident alien" and discuss the special tax consequences of U.S.taxation on various types of income of a nonresident alien.

Accepted Answer

A nonresident alien is an alien who does

Question 16

A foreign corporation is owned by five unrelated individuals.John,Sam,and David are U.S.citizens who own 30%,18% and 9%,respectively,of the foreign corporation's single class of stock.Alberto and Manuel are nonresident aliens who own 37% and 6%,respectively,of the foreign corporation's stock.Which of the following statements is true?

Accepted Answer

A) There are three "U.S.shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
B) There are three "U.S.shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
C) There are two "U.S.shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
D) There are two "U.S.shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
A) There are three "U.S.shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) . 
B) There are three "U.S.shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
C) There are two "U.S.shareholders" and the foreign corporation is not a controlled foreign corporation (CF
C) . 
D) There are two "U.S.shareholders" and the foreign corporation is a controlled foreign corporation (CF
C) .

Question 17

Ashley,a U.S.citizen,works in England for part of the year.She earns $40,000 in England,paying $10,000 in income taxes to the British government.Her U.S.income is $60,000 and she pays $12,000 in U.S.taxes.Her taxes on her worldwide income are $20,000.What is Ashley's foreign tax credit? Assume she does not qualify for the foreign-earned income exclusion.

Accepted Answer

A) $8,000 
B) $10,000 
C) $12,000 
D) none of the above 
A) $8,000 
B) $10,000 
C) $12,000 
D) none of the above

Question 18

Which of the following characteristics is not used by the U.S.government to determine the tax treatment accorded foreign-related transactions?

Accepted Answer

A) the taxpayer's country of citizenship 
B) the taxpayer's country of residence 
C) the taxpayer's type of business 
D) the type of income earned 
A) the taxpayer's country of citizenship 
B) the taxpayer's country of residence 
C) the taxpayer's type of business 
D) the type of income earned

Question 19

Nonresident aliens are not allowed to claim the standard deduction.

Accepted Answer

A) True 
 B)False

Question 20

Julia,an accrual-method taxpayer,is a U.S.citizen and a resident of a foreign country.Her tax year for both countries is a calendar year.Julia accrues 50,000 coras for the foreign country tax liability on December 31 of last year when the exchange rate is one cora = $1.Julia pays the tax to the foreign country on its due date,March 1 of the current year.The exchange rate on that date is one cora = $1.50.Julia files her U.S.tax return for last year on April 15 of the current year when the exchange rate is one cora = $2.Julia's foreign tax credit is

Accepted Answer

A) $50,000. 
B) $75,000. 
C) $100,000. 
D) none of the above. 
A) $50,000. 
B) $75,000. 
C) $100,000. 
D) none of the above.

Exam 16: U.S. Taxation of Foreign-Related Transactions

Overseas business activities conducted by U.S.corporations receive which one of the following favorable tax breaks?

Identify which of the following statements is false.

U.S.citizen Patrick is a bona fide resident of a foreign country for all of the current year.Patrick uses a calendar year as his tax year.He has $100,000 of self-employment income and incurs $20,000 in housing expenses.The base housing cost amount is $16,624.The deduction for housing expenses is

Identify which of the following statements is true.

For the foreign credit limitation calculation,income derived from the sale of inventory which is produced by the seller,is considered earned

Identify which of the following statements is true.

A nonresident alien earns $10,000 of dividends from a domestic corporation,which is the alien's only U.S.source income.Which one of the following statements is incorrect?

Excess foreign tax credits can be carried back one year and forward five years.

A nonresident alien can elect to be considered a resident alien if the nonresident alien is married to a U.S.citizen or a resident alien on the last day of the tax year and both spouses consent.

U.S.citizens and resident aliens working abroad may qualify for the foreign-earned income exclusion of $105,900 in 2019.

U.S.shareholders are not taxed on dividends paid by a foreign subsidiary as long as the earnings are not remitted to them as dividends.

Pedro,a nonresident alien,licenses a patent to a U.S.company for an $11 per unit fee for each unit produced.As a result of receiving the fee,Pedro must recognize the fee as

Define the term "nonresident alien" and discuss the special tax consequences of U.S.taxation on various types of income of a nonresident alien.

Which of the following characteristics is not used by the U.S.government to determine the tax treatment accorded foreign-related transactions?

Nonresident aliens are not allowed to claim the standard deduction.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

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Special Partnership Issues

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The Gift Tax

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Income Taxation of Trusts and Estates

Administrative Procedures

an Introduction to Taxation

Determination of Tax

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Property Transactions: Capital Gains and Losses

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Depreciation,cost Recovery,amortization,and Depletion

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Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

Tax Research

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