Question 1

Identify which of the following statements is true.

Accepted Answer

A)  When a cash-basis taxpayer elects to take a credit for accrued foreign income taxes, certain other income and expense items must likewise be accrued. 
B)  The taxpayer may revoke an election to exclude foreign-source earned income if a loss is incurred from foreign employment. 
C)  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 sometime during the tax year and both spouses consent. 
D)  All of the above are true.

Question 2

Bell Corporation, a domestic corporation, sells jars to its wholly owned foreign subsidiary, Jam. Jam Corporation is incorporated in and pays taxes to Country J. Bell Corporation normally sells jars to a U.S. wholesaler providing services similar to those provided by Jam at a price of $4 per unit. Both wholesalers incur similar costs. If Bell Corporation sells jars to Jam for $3 per unit, what are the tax effects?

Accepted Answer

The answer of Bell Corporation, a domestic corporation, sells jars...

Question 3

Discuss the advantages of conducting overseas business activities through a foreign corporation.

Accepted Answer

The answer of Discuss the advantages of conducting overseas business...

Question 4

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 $30,000 of dividend income paid by a U.S. corporation on a stock investment portfolio unrelated to his trade or business. How will the dividend be taxed and how will the tax be collected?

Accepted Answer

The answer of Jacque, a single nonresident alien, is in...

Question 5

A foreign corporation with a single class of stock is owned equally by Jericho Corporation, a U.S. corporation, and Joshua, a U.S. citizen. Joshua owns no Alpha Corporation stock. Is the foreign corporation a controlled foreign corporation (CFC)?

Accepted Answer

The answer of A foreign corporation with a single class...

Question 6

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.

Question 7

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.

Question 8

Jose, a U.S. citizen, has taxable income from U.S. sources of $15,000 and taxable income from a foreign country of $35,000. Assume the U.S. tax rate is 25% and Jose paid $12,000 in taxes to the foreign country. What foreign tax credit can be claimed by Jose?

Accepted Answer

The answer of Jose, a U.S. citizen, has taxable income...

Question 9

A nonresident alien cannot

Accepted Answer

A)  elect to be treated as a resident alien. 
B)  elect to be treated as a resident alien before satisfying the substantial presence test for the calendar year following the election year if unmarried. 
C)  make an irrevocable election to be treated as a resident alien after satisfying the substantial presence test. 
D)  make an election to be treated as a resident alien if married to a resident alien.

Question 10

What is the branch profits tax? Explain the Congressional intent behind its enactment.

Accepted Answer

The answer of What is the branch profits tax? Explain...

Question 11

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.

Question 12

Identify which of the following statements is true.

Accepted Answer

A)  For a foreign corporation to be a controlled foreign corporation (CF
C) , more than 40% of its voting stock, or more than 40% of the value of its outstanding stock, must be owned by U.S. shareholders on any day of the corporation's tax year. 
B)  Under the Subpart F rules, controlled foreign corporations (CFCs) are required to distribute a certain portion of their income as dividends to their U.S. shareholders. 
C)  When a controlled foreign corporation (CF
C)  earns Subpart F income, such income is considered to be a constructive distribution to the CFC's U.S. shareholders on the last day of the CFC's tax year, or the last day on which CFC status is retained. 
D)  All of the above are true.

Question 13

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 two baskets are needed for the two types of income because the interest is passive income, Karen's foreign tax credit that can be claimed is

Accepted Answer

A)  $5,000. 
B)  $10,000. 
C)  $20,000. 
D)  none of the above.

Question 14

What is a corporate inversion and why was this provision enacted?

Accepted Answer

The answer of What is a corporate inversion and why...

Question 15

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

The answer of Quality Corporation created a foreign subsidiary in...

Question 16

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.

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 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

Question 18

In 2017, Phoenix Corporation is a controlled foreign corporation (CFC) incorporated in Country X. It is 100% owned by its U.S parent corporation. Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S. parent corporation. All widgets have the same gross profit. Sixty percent of the widgets were sold through a Country Y wholesaler that is 100% owned by Phoenix, and are destined for use in Country Y. The remaining 40% are sold through unrelated Country X wholesalers and are destined for use in Country X. What amount of profits will be constructively distributed as foreign-based company sales income to the U.S. parent company?

Accepted Answer

A)  $0 
B)  $32,000 
C)  $48,000 
D)  $80,000

Question 19

Prior to 2018, domestic corporation X owns all the stock of controlled foreign corporation (CFC) T. X's acquisition cost for the CFC investment is $150,000. The CFC reports E&P of $200,000 since the domestic corporation acquired its interest, of which $120,000 was Subpart F income. The CFC makes a cash distribution of $90,000 to the domestic corporation. What is the domestic corporation's basis for its investment in T immediately after the cash distribution?

Accepted Answer

A)  $150,000 
B)  $180,000 
C)  $230,000 
D)  none of the above

Question 20

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

The answer of Define the term "nonresident alien" and discuss...

Exam 16: Us Taxation of Foreign-Related Transactions

Identify which of the following statements is true.

Discuss the advantages of conducting overseas business activities through a foreign corporation.

A foreign corporation with a single class of stock is owned equally by Jericho Corporation, a U.S. corporation, and Joshua, a U.S. citizen. Joshua owns no Alpha Corporation stock. Is the foreign corporation a controlled foreign corporation (CFC)?

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

Identify which of the following statements is true.

Jose, a U.S. citizen, has taxable income from U.S. sources of $15,000 and taxable income from a foreign country of $35,000. Assume the U.S. tax rate is 25% and Jose paid $12,000 in taxes to the foreign country. What foreign tax credit can be claimed by Jose?

A nonresident alien cannot

What is the branch profits tax? Explain the Congressional intent behind its enactment.

Identify which of the following statements is true.

What is a corporate inversion and why was this provision enacted?

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