Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  A domestic subsidiary's earnings are taxed in the year earned. 
B)  A foreign corporation's (less than 50% ownership) are not taxed until repatriated. 
C)  All of a controlled foreign corporation's earnings are taxed as earned. 
D)  U.S. taxpayers with a foreign branch can reduce part or all of their U.S. taxes by the foreign tax credit. 
A)  A domestic subsidiary's earnings are taxed in the year earned. 
B)  A foreign corporation's (less than 50% ownership) are not taxed until repatriated. 
C)  All of a controlled foreign corporation's earnings are taxed as earned. 
D)  U.S. taxpayers with a foreign branch can reduce part or all of their U.S. taxes by the foreign tax credit.

Question 2

Which of the following statements regarding inversions is incorrect?

Accepted Answer

A)  The objective of an inversion is to avoid U.S. tax on worldwide income. 
B)  In an inversion, a U.S. corporation reorganizes as a foreign corporation. 
C)  The IRS will disregard the inversion if the former shareholders of the U.S. corporation continue to own 60% of the foreign corporation's stock. 
D)  The IRS will examine whether the foreign corporation conducts substantial business in the foreign country of incorporation to determine if the inversion is valid. 
A)  The objective of an inversion is to avoid U.S. tax on worldwide income. 
B)  In an inversion, a U.S. corporation reorganizes as a foreign corporation. 
C)  The IRS will disregard the inversion if the former shareholders of the U.S. corporation continue to own 60% of the foreign corporation's stock. 
D)  The IRS will examine whether the foreign corporation conducts substantial business in the foreign country of incorporation to determine if the inversion is valid.

Question 3

Jacque, a single nonresident alien, is in the United States for 80 days in the current year engaging in the conduct of a U.S.trade or business.Jacque has a $15,000 capital gain on the sale of stock in a U.S.corporation while he was in the United States.The capital gain is not connected to his trade or business.How will the capital gain be taxed and how will the tax be collected?

Accepted Answer

The capital gain is exempt from U.S.taxa

Question 4

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 5

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 6

Identify which of the following statements is false.

Accepted Answer

A)  Earned income is excludable from gross income only if it is foreign-source income. 
B)  Taxable pensions and annuities are excluded from the definition of earned income when computing the foreign-earned income exclusion. 
C)  An individual meets the bona fide resident test by establishing a home in a foreign country for 330 days. 
D)  All of the above are false. 
A)  Earned income is excludable from gross income only if it is foreign-source income. 
B)  Taxable pensions and annuities are excluded from the definition of earned income when computing the foreign-earned income exclusion. 
C)  An individual meets the bona fide resident test by establishing a home in a foreign country for 330 days. 
D)  All of the above are false.

Question 7

Which of the following is an advantage of conducting foreign operations through a branch?

Accepted Answer

A)  Foreign branch losses can offset domestic income. 
B)  Foreign branch income is taxed at a lower rate than domestic income. 
C)  The parent's assets are protected from foreign branch creditors. 
D)  Foreign branch income is taxed by both the United States and the host country. 
A)  Foreign branch losses can offset domestic income. 
B)  Foreign branch income is taxed at a lower rate than domestic income. 
C)  The parent's assets are protected from foreign branch creditors. 
D)  Foreign branch income is taxed by both the United States and the host country.

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

A foreign corporation with a single class of stock is owned 8% by Bert, 49% by Xi Yong, 30% by Ernie, and 13% by Mark.Bert, Ernie, and Mark are U.S.citizens, and Xi Yong is a nonresident alien.The shareholders are not related.Is the foreign corporation a controlled foreign corporation (CFC)?

Accepted Answer

It is not a CFC (only 43% owne

Question 11

In January of the current year, Stan Signowski's U.S.employer assigned him to their Paris office.This year, he earned salary, a cost-of-living allowance, a housing allowance, a home leave allowance that permits him to return home once each year, and an education allowance to pay for U.S.schooling for his son.Stan and his wife, Jennifer, have rented an apartment in Paris and paid French income taxes.What tax issues does Stan need to consider when preparing his tax return?

Accepted Answer

• Is Stan Signowski eligible to claim th

Question 12

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 U.S.taxes on her worldwide income are $20,000.What is Ashley's excess foreign tax credit? Assume she does not qualify for the foreign-earned income exclusion.

Accepted Answer

A)  $0 
B)  $2,000 
C)  $4,000 
D)  none of the above 
A)  $0 
B)  $2,000 
C)  $4,000 
D)  none of the above

Question 13

U.S.Corporation, a domestic corporation, owns all of Foreign Corporation's stock.Foreign Corporation is incorporated in France.This year, Foreign Corporation reports $100,000 in aftertax profits in France, none of which is Subpart F income.U.S.Corporation

Accepted Answer

A)  must include the $100,000 profit in its current-year U.S. tax return. 
B)  never has to include Foreign Corporation's profits in its U.S. tax return. 
C)  reports Foreign Corporation's profits in its U.S. tax return in the same manner it would if Foreign Corporation were instead a foreign branch. 
D)  must include Foreign Corporation's profits in its U.S. tax return when they are paid to U.S. Corporation in the form of a dividend. 
A)  must include the $100,000 profit in its current-year U.S. tax return. 
B)  never has to include Foreign Corporation's profits in its U.S. tax return. 
C)  reports Foreign Corporation's profits in its U.S. tax return in the same manner it would if Foreign Corporation were instead a foreign branch. 
D)  must include Foreign Corporation's profits in its U.S. tax return when they are paid to U.S. Corporation in the form of a dividend.

Question 14

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 $15,616.The deduction for housing expenses is

Accepted Answer

A)  $13,184 for AGI. 
B)  $13,184 from AGI. 
C)  $4,384 for AGI. 
D)  $6,816 from AGI. 
A)  $13,184 for AGI. 
B)  $13,184 from AGI. 
C)  $4,384 for AGI. 
D)  $6,816 from AGI.

Question 15

Identify which of the following statements is false.

Accepted Answer

A)  A nonresident alien can elect to have income earned on a passive real estate investment treated as trade or business income. 
B)  Nonresident aliens may use either the standard deduction or claim itemized deductions. 
C)  Nonresident aliens are generally allowed to claim only a single personal exemption. 
D)  All of the above are false. 
A)  A nonresident alien can elect to have income earned on a passive real estate investment treated as trade or business income. 
B)  Nonresident aliens may use either the standard deduction or claim itemized deductions. 
C)  Nonresident aliens are generally allowed to claim only a single personal exemption. 
D)  All of the above are false.

Question 16

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 17

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 60,000 frugs of E&P, pays a 40,000- frug dividend, 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 dividend amount?

Accepted Answer

A)  $5,400 
B)  $4,500 
C)  $5,040 
D)  $3,600 
A)  $5,400 
B)  $4,500 
C)  $5,040 
D)  $3,600

Question 18

Michael, a U.S.citizen, earned $100,000 of foreign-earned income and no other U.S.or foreign income in 2013.He also incurred $10,000 of employment-related expenses, none of which were reimbursed.If the full foreign-earned income exclusion is utilized, calculate the deductible employment-related expense (before the 2% nondeductible floor).

Accepted Answer

$10,000 × ($97,600/$100,000)=

Question 19

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 20

The physical presence test method of qualifying for the foreign-earned income exclusion requires the

Accepted Answer

A)  presence in one foreign country for at least 330 full days during a 12-month period. 
B)  presence in one or more foreign countries for at least 330 full days during a single tax year. 
C)  presence in one or more foreign countries for at least 330 full days during a 12-month period. 
D)  presence in one or more foreign countries for at least 330 consecutive full days during a 12-month period. 
A)  presence in one foreign country for at least 330 full days during a 12-month period. 
B)  presence in one or more foreign countries for at least 330 full days during a single tax year. 
C)  presence in one or more foreign countries for at least 330 full days during a 12-month period. 
D)  presence in one or more foreign countries for at least 330 consecutive full days during a 12-month period.

Which of the following statements is incorrect?

Which of the following statements regarding inversions is incorrect?

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

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

Identify which of the following statements is false.

Which of the following is an advantage of conducting foreign operations through a branch?

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.

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

A foreign corporation with a single class of stock is owned 8% by Bert, 49% by Xi Yong, 30% by Ernie, and 13% by Mark.Bert, Ernie, and Mark are U.S.citizens, and Xi Yong is a nonresident alien.The shareholders are not related.Is the foreign corporation a controlled foreign corporation (CFC)?

U.S.Corporation, a domestic corporation, owns all of Foreign Corporation's stock.Foreign Corporation is incorporated in France.This year, Foreign Corporation reports $100,000 in aftertax profits in France, none of which is Subpart F income.U.S.Corporation

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 $15,616.The deduction for housing expenses is

Identify which of the following statements is false.

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.

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?

The physical presence test method of qualifying for the foreign-earned income exclusion requires the

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

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Filters

Exam 16: US Taxation of Foreign-Related Transactions

Which of the following statements is incorrect?

Which of the following statements regarding inversions is incorrect?

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

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

Identify which of the following statements is false.

Which of the following is an advantage of conducting foreign operations through a branch?

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.

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

A foreign corporation with a single class of stock is owned 8% by Bert, 49% by Xi Yong, 30% by Ernie, and 13% by Mark.Bert, Ernie, and Mark are U.S.citizens, and Xi Yong is a nonresident alien.The shareholders are not related.Is the foreign corporation a controlled foreign corporation (CFC)?

U.S.Corporation, a domestic corporation, owns all of Foreign Corporation's stock.Foreign Corporation is incorporated in France.This year, Foreign Corporation reports $100,000 in aftertax profits in France, none of which is Subpart F income.U.S.Corporation

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 $15,616.The deduction for housing expenses is

Identify which of the following statements is false.

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.

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?

The physical presence test method of qualifying for the foreign-earned income exclusion requires the

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

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Filters