Question 1

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.

Question 2

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...

Question 3

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.

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

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 6

Darlene, a U.S. citizen, has foreign-earned income of $150,000 and incurs $33,750 of foreign-earned income taxes. How much of Darlene's foreign income taxes are noncreditable?

Accepted Answer

The answer of Darlene, a U.S. citizen, has foreign-earned income...

Question 7

Income derived from the sale of merchandise inventory (i.e., final goods purchased for resale)are sourced in the country where the sale occurs.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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.

Question 10

Identify which of the following statements is false.

Accepted Answer

A) The foreign-earned income exclusion is $104,100 in 2020. 
B) The primary purpose for the foreign-earned income exclusion is to prevent double taxation of income. 
C) A taxpayer who is physically present in a foreign country for 330 full days out of a 12-month period satisfies the bona fide foreign resident test. 
D) All of the above are false.

Question 11

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 12

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 13

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.

Question 14

Income is "effectively connected" with the conduct of a U.S. business only if

Accepted Answer

A) the asset-use test is met. 
B) the business activities test is met. 
C) activities of the U.S. business are a material factor in the realization of the income. 
D) Either A, B, or C can be correct.

Question 15

Compare the U.S. tax treatment of a nonresident alien and a resident alien, both of whom earn U.S. trade or business and U.S. investment income.

Accepted Answer

The answer of Compare the U.S. tax treatment of a...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

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

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

Question 19

Domestic corporation B owns 200 of the 400 outstanding shares of foreign corporation K's stock. U.S. citizen R owns the remaining K stock. The domestic corporation held the stock for 40 days two years ago, 365 days last year, and 80 days this year. None of K's income is Subpart F income. The foreign corporation has E&P of $50,000 for each of the three years in question. None of the years is a leap year. On the 80th day of the current year, the stock is sold by B to R in a transaction in which a $100,000 gain is recognized by B. What part of B's gain is capital gain?

Accepted Answer

The answer of Domestic corporation B owns 200 of the...

Question 20

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.

Exam 16: Us Taxation of Foreign-Related Transactions

Identify which of the following statements is false.

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?

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

Darlene, a U.S. citizen, has foreign-earned income of $150,000 and incurs $33,750 of foreign-earned income taxes. How much of Darlene's foreign income taxes are noncreditable?

Income derived from the sale of merchandise inventory (i.e., final goods purchased for resale)are sourced in the country where the sale occurs.

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.

Identify which of the following statements is true.

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

Income is "effectively connected" with the conduct of a U.S. business only if

Compare the U.S. tax treatment of a nonresident alien and a resident alien, both of whom earn U.S. trade or business and U.S. investment income.

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

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)?

A nonresident alien cannot