Question 1

Zeta Corporation,incorporated in Country Z,is 100% owned by Zelda Corporation,a U.S.corporation.Zelda purchases some machines from an unrelated corporation,for use in Country A.The portion of the sales contract covering installation and maintenance of the machines is assigned by Zelda to Zeta.Zeta is to be paid for these services by Zelda.Does this qualify as foreign base company services income?

Accepted Answer

Yes,because it is performed for a related party (Zelda)outside of its country of incorporation (Country A).

Question 2

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

Question 3

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)= $9,760 nondeductible
$10,000 - $9,760 = $240 deductible (before the 2% nondeductible floor*)

Question 4

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

Question 5

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 6

Music Corporation is a CFC incorporated in Country M.Music receives interest and dividends from its two foreign subsidiary corporations,Sharp Corporation and Flat Corporation.Sharp is incorporated in Country S and conducts all of its activities in that country.Flat is incorporated in Country M and conducts all of its activities in that country.Are the interest and dividends received by Music Corporation FPHCI?

Accepted Answer

The answer of Music Corporation is a CFC incorporated in...

Question 7

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 answer of Jacque,a single nonresident alien,is in the United...

Question 8

What are the carryback and carryforward periods for the foreign tax credit?

Accepted Answer

A)  back two years;forward five years
B)  back three years;forward ten years
C)  back one year;forward ten years
D)  back two years;forward twenty years

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.

Question 10

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.

Question 11

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 $75,000 of sales income earned while in the United States and $30,000 of non-U.S.sales income earned while he was outside the United States.How will the income be taxed and how will the tax be collected?

Accepted Answer

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

Question 12

U.S.citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign-earned income exclusion for 60 days in 2010;365 days in 2011;and 60 days this year,2012.The maximum earned income exclusion for this year is?

Accepted Answer

A)  $13,733
B)  $16,044
C)  $13,151
D)  none of the above

Question 13

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 from U.S.sources of...

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

Nonresident aliens are not allowed to claim the standard deduction.

Accepted Answer

A) True 
 B)False

Question 16

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 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

Question 18

Discuss the Sec.482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower-than-normal price.

Accepted Answer

The answer of Discuss the Sec.482 rules concerning the sale...

Question 19

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 $3,000 of interest income earned on a bank account in his home country and $1,800 of interest income earned on a bank account located in Addison,Illinois.How will the interest be taxed and how will the tax be collected?

Accepted Answer

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

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 16: Us Taxation of Foreign-Related Transactions

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

What are the carryback and carryforward periods for the foreign tax credit?

Identify which of the following statements is true.

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

U.S.citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign-earned income exclusion for 60 days in 2010;365 days in 2011;and 60 days this year,2012.The maximum earned income exclusion for this year is?

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?

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

Nonresident aliens are not allowed to claim the standard deduction.

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

Discuss the Sec.482 rules concerning the sale of goods and services between a domestic parent corporation and a foreign subsidiary at a lower-than-normal price.

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.