Question 1

Which of the following is required in order for a transaction to be considered a corporate inversion?

Accepted Answer

A) A foreign corporation acquires substantially all of the assets of a U.S.corporation. 
B) Former shareholders of the U.S.corporation own 80% or more of the stock in the foreign corporation by reason of their U.S.stock ownership. 
C) The former U.S.company and its affiliates do not conduct substantial business in the foreign country of incorporation. 
D) All of the above are required. 
A) A foreign corporation acquires substantially all of the assets of a U.S.corporation. 
B) Former shareholders of the U.S.corporation own 80% or more of the stock in the foreign corporation by reason of their U.S.stock ownership. 
C) The former U.S.company and its affiliates do not conduct substantial business in the foreign country of incorporation. 
D) All of the above are required.

Question 2

Perry,a U.S.citizen,is transferred by his employer to Japan for a three-year assignment.Which one of the following items is not excluded under Sec.911?

Accepted Answer

A) base salary 
B) cost-of-living allowance 
C) housing costs 
D) premiums paid on first $50,000 of group term life insurance 
A) base salary 
B) cost-of-living allowance 
C) housing costs 
D) premiums paid on first $50,000 of group term life insurance

Question 3

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 4

U.S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in Country T.In its first year of operations,Foreign Corporation earns 100,000 frugs of E&P,pays a 20,000- frug dividend to U.S.Corporation,and pays 5,000 frugs in income taxes.The exchange rate between the dollar and the frug is: first year average,1 frug = $0.20; yearend,1 frug = $0.25); tax payment date,1 frug = $0.30; and dividend payment date,1 frug = $0.28.What is the translated foreign tax amount attributable to the dividend for deemed paid foreign tax credit purposes?

Accepted Answer

A) $200.00 
B) $250.00 
C) $300.00 
D) $280.00 
A) $200.00 
B) $250.00 
C) $300.00 
D) $280.00

Question 5

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 6

Alan,a U.S.citizen,works in Germany and earns $70,000,paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

Accepted Answer

A) $12,000 
B) $14,318 
C) $20,000 
D) none of the above 
A) $12,000 
B) $14,318 
C) $20,000 
D) none of the above

Question 7

Alan,a U.S.citizen,works in Germany and earns $70,000,paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's excess foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

Accepted Answer

A) $0 
B) $5,682 
C) $8,000 
D) none of the above 
A) $0 
B) $5,682 
C) $8,000 
D) none of the above

Question 8

If foreign taxes on foreign income exceed U.S.taxes on foreign income,the excess foreign taxes are credited against U.S.taxes in the current year.

Accepted Answer

A) True 
 B)False

Question 9

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) When computing the foreign tax credit limitation,taxable income for individual taxpayers is computed without a personal exemption deduction. 
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) When computing the foreign tax credit limitation,taxable income for individual taxpayers is computed without a personal exemption deduction. 
D) All of the above are false.

Question 10

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 25%.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 11

Excess foreign taxes in one basket cannot offset limitation amounts in another basket.

Accepted Answer

A) True 
 B)False

Question 12

Identify which of the following statements is true.

Accepted Answer

A) An individual who is physically present in a foreign country for 330 full days out of a 12-month period can claim the foreign-earned income exclusion only for the days in the 12-month period he/she is physically present in a foreign country. 
B) An individual,who is a bona fide resident of a foreign country for at least one full tax year,can claim the foreign-earned income exclusion for all days on which he/she is a resident of the foreign country and physically present in that country. 
C) Fringe benefits that are excluded from gross income under a Code Section other than Sec.911 reduce the annual dollar ceiling for the foreign income exclusion. 
D) All of the above are false. 
A) An individual who is physically present in a foreign country for 330 full days out of a 12-month period can claim the foreign-earned income exclusion only for the days in the 12-month period he/she is physically present in a foreign country. 
B) An individual,who is a bona fide resident of a foreign country for at least one full tax year,can claim the foreign-earned income exclusion for all days on which he/she is a resident of the foreign country and physically present in that country. 
C) Fringe benefits that are excluded from gross income under a Code Section other than Sec.911 reduce the annual dollar ceiling for the foreign income exclusion. 
D) All of the above are false.

Question 13

Marcella,an alien individual,is present in the United States for 122 days this year and 122 days each in the past two years.Does she satisfy both the 31-day and 183-day requirements for U.S.Residency status?

Accepted Answer

The answer of Marcella,an alien individual,is present in the United...

Question 14

Quality Corporation created a foreign subsidiary in Country C this year.The subsidiary receives components from Quality,assembles the components into a finished product using local labor,and sells them to unrelated wholesalers in Countries A,B,and C using its own sales force.The foreign subsidiary has paid no dividends to the parent this year.What tax issues should Quality's Director of Taxes consider with respect to these activities?

Accepted Answer

• Is the Country C corporation a control

Question 15

Identify which of the following statements is true.

Accepted Answer

A) The foreign income taxes withheld from a dividend remittance made by a foreign corporation are translated into U.S.dollars at the current exchange rate in effect for the date the dividend is paid. 
B) A U.S.subsidiary that is used by a foreign parent corporation to conduct its U.S.business activities is required to withhold 30% of dividends paid to the foreign corporation unless a treaty provides for a lower withholding rate. 
C) A foreign corporation that conducts a U.S.trade or business may be required to pay the corporate income tax,the corporate alternative minimum tax,and the branch profits in a single year. 
D) All of the above are false. 
A) The foreign income taxes withheld from a dividend remittance made by a foreign corporation are translated into U.S.dollars at the current exchange rate in effect for the date the dividend is paid. 
B) A U.S.subsidiary that is used by a foreign parent corporation to conduct its U.S.business activities is required to withhold 30% of dividends paid to the foreign corporation unless a treaty provides for a lower withholding rate. 
C) A foreign corporation that conducts a U.S.trade or business may be required to pay the corporate income tax,the corporate alternative minimum tax,and the branch profits in a single year. 
D) All of the above are false.

Question 16

Identify which of the following statements is true.

Accepted Answer

A) When a controlled foreign corporation (CF
C) uses Subpart F income to invest in U.S.property,the investments are characterized as constructive distributions. 
B) A controlled foreign corporation (CF
C) can avoid the constructive dividend distribution resulting from investments in U.S.property if it invests in U.S.government obligations. 
C) Distributions made by a controlled foreign corporation (CF
C) are deemed to be paid first from tax-deferred earnings. 
D) All of the above are false. 
A) When a controlled foreign corporation (CF
C) uses Subpart F income to invest in U.S.property,the investments are characterized as constructive distributions. 
B) A controlled foreign corporation (CF
C) can avoid the constructive dividend distribution resulting from investments in U.S.property if it invests in U.S.government obligations. 
C) Distributions made by a controlled foreign corporation (CF
C) are deemed to be paid first from tax-deferred earnings. 
D) All of the above are false.

Question 17

Explain the alternatives available to individual taxpayers for reporting foreign income taxes that have been paid or accrued.

Accepted Answer

An annual election is available to indiv

Question 18

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 19

Cane Corporation owns 45% of the stock of Edmonton Airline Corporation.In its first year of operations,Edmonton Airline,a Canadian corporation,earns $400,000 of E&P and pays a $100,000 dividend to Cane Corporation.Edmonton Airline pays $50,000 in Canadian income taxes.All amounts are expressed in U.S.dollars.What is Cane Corporation's deemed paid foreign tax credit for the dividend?

Accepted Answer

A) $ 0 
B) $12,500 
C) $50,000 
D) none of the above 
A) $ 0 
B) $12,500 
C) $50,000 
D) none of the above

Question 20

U)S.Corporation owns 45% of the stock of Foreign Corporation.Foreign Corporation is incorporated in France.During the current year,Foreign Corporation reports $100,000 of E&P,pays $30,000 in foreign income taxes,and remits $40,000 of dividends ratably to its shareholders.In prior post-1986 tax years,Foreign Corporation reported $60,000 of E&P,paid foreign income taxes of $20,000,and paid no dividends.What is U.S.Corporation's deemed paid foreign tax credit for the current-year dividend?

Accepted Answer

A) $5,000 
B) $5,625 
C) $18,000 
D) $22,000 
A) $5,000 
B) $5,625 
C) $18,000 
D) $22,000

Exam 16: Ustaxation of Foreign-Related Transactions

Which of the following is required in order for a transaction to be considered a corporate inversion?

Perry,a U.S.citizen,is transferred by his employer to Japan for a three-year assignment.Which one of the following items is not excluded under Sec.911?

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.

Alan,a U.S.citizen,works in Germany and earns $70,000,paying $20,000 in German taxes.His U.S.income is $40,000 and he pays $8,000 in U.S.taxes.His U.S.taxes on his worldwide income are $22,500.What is Alan's foreign tax credit? Assume he does not qualify for the foreign-earned income exclusion.

If foreign taxes on foreign income exceed U.S.taxes on foreign income,the excess foreign taxes are credited against U.S.taxes in the current year.

Identify which of the following statements is true.

Excess foreign taxes in one basket cannot offset limitation amounts in another basket.

Identify which of the following statements is true.

Marcella,an alien individual,is present in the United States for 122 days this year and 122 days each in the past two years.Does she satisfy both the 31-day and 183-day requirements for U.S.Residency status?

Identify which of the following statements is true.

Identify which of the following statements is true.

Explain the alternatives available to individual taxpayers for reporting foreign income taxes that have been paid or accrued.

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