Question 1

BendCo,Inc. ,a U.S.corporation,has foreign-source income and pays foreign taxes as follows.
  
BendCo's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume 35%).What is BendCo's U.S.tax liability after the FTC?

Accepted Answer

The answer of BendCo,Inc. ,a U.S.corporation,has foreign-source income and pays...

Question 2

The source of income received for the use of intangible property is the country in which the owner of the property producing the income is resident.

Accepted Answer

A) True 
 B)False

Question 3

USCo,a domestic corporation,purchases inventory for resale from distributors within the U.S.and resells this inventory to customers outside the U.S.with title passing outside the U.S.What is the source of the USCo's inventory sales income?

Accepted Answer

A) 50% U.S.source and 50% foreign source. 
B) 100% U.S.source. 
C) 100% foreign source. 
D) 50% foreign source and 50% sourced based on location of manufacturing assets.

Question 4

Twelve unrelated U.S.persons own a foreign corporation equally.The foreign corporation is a CFC.

Accepted Answer

A) True 
 B)False

Question 5

During 2010,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Accepted Answer

The answer of During 2010,Martina,an NRA,receives interest income of $50,000...

Question 6

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A) Everything else equal,larger foreign-source income increases the foreign tax credit limitation for U.S.persons. 
B) Everything else equal,larger foreign-source income decreases the foreign tax credit limitation for U.S.persons. 
C) Everything else equal,changing foreign-source income has no impact on the foreign tax credit limitation for U.S.persons. 
D) Everything else equal,larger U.S.-source income increases the foreign tax credit limitation for U.S.persons.

Question 7

Which of the following statements regarding the sourcing of gross income is true?

Accepted Answer

A) Foreign persons not engaged in a U.S.trade or business are indifferent as to whether any of their income is U.S.source. 
B) All income earned by foreign persons not engaged in a U.S.trade or business is treated as foreign source. 
C) U.S.-source income is not subject to withholding so long as such income is not treated as effectively connected with a U.S.trade or business. 
D) Certain U.S.-source investment income earned by foreign persons not engaged in a U.S.trade or business may be subject to a U.S.withholding tax.

Question 8

BoxCo,Inc. ,a domestic corporation,owns 10% of the stock of X and of Y,two foreign corporations that are not CFCs and pay no foreign taxes.Both X and Y earn only general limitation income.During the current year,BoxCo,Inc.receives dividend income of $50,000 from X and $80,000 from Y for the tax year (all from post-2003 E & P).BoxCo's total taxable income for the current year is $730,000.Foreign withholding taxes of $49,000 ($5,000 on the X dividend and $44,000 on the Y dividend)and U.S.taxes of $248,200 (before FTC)are levied.What is BoxCo's allowed foreign tax credit?

Accepted Answer

A) $130,000. 
B) $49,000. 
C) $32,200. 
D) $44,200.

Question 9

A nonresident alien realizes a gain on the sale of commercial real estate located in Cleveland,Ohio.The real estate was sold to his cousin who is also a nonresident alien.The seller has foreign-source income from the sale because the seller is a foreign resident.

Accepted Answer

A) True 
 B)False

Question 10

BrazilCo,Inc. ,a foreign corporation with a U.S.trade or business,has U.S.-source income as follows.

Accepted Answer

The answer of BrazilCo,Inc. ,a foreign corporation with a U.S.trade...

Question 11

Which of the following statements regarding income sourcing is not correct?

Accepted Answer

A) U.S.persons benefit from earning low-tax foreign-source income. 
B) Foreign persons generally benefit from avoiding U.S.-source income classification. 
C) U.S.persons are not concerned with source of income because all their income is subject to U.S.tax under a worldwide system. 
D) Foreign persons may be subject to tax on U.S.-source income without regard to their actual presence in the United States.

Question 12

A U.S.corporation receives a $200,000 dividend from a 20% owned foreign corporation.The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000.The U.S.corporation's U.S.tax liability before FTC is $350,000,the gross dividend income is $240,000,and worldwide taxable income is $1 million.The U.S.corporation's foreign tax credit for the taxable year is:

Accepted Answer

A) $70,000. 
B) $40,000. 
C) $30,000. 
D) $84,000. 
E) Some other amount.

Question 13

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

Accepted Answer

A) Calculation of U.S.withholding tax on the FDAP income of foreign persons. 
B) Calculation of a foreign person's income effectively connected with carrying on a U.S.trade or business. 
C) Calculation of the § 911 exclusion. 
D) Calculation of a U.S.person's total taxable income.

Question 14

A U.S.corporation owns 30% of a foreign corporation.The remaining 70% is owned by other foreign corporations not controlled by the U.S.corporation.The functional currency of the foreign corporation is the euro.The U.S.corporation receives a dividend equivalent to 50,000€.If the average exchange rate for the E & P to which the dividend is attributed is 1.2€: $1,the exchange rate at year end is .95€: $1 and on the date of the dividend payment is 1.1€: $1,what is the result to the U.S.corporation on receipt of the dividend?

Accepted Answer

A) The U.S.corporation receives a dividend of $45,455 and realizes an exchange gain of $3,788 [$45,455 minus $41,667 (50,000€/1.2)]. 
B) The U.S.corporation receives a dividend of $45,455 (50,000€/1.1)with no exchange gain or loss. 
C) The U.S.corporation receives a dividend of $41,667 and realizes an exchange loss of $3,788 ($41,667 minus $45,455). 
D) The U.S.corporation receives a dividend of $52,632 (50,000€/.95)with no exchange gain or loss.

Question 15

Section 482 is used to:

Accepted Answer

A) Force taxpayers to use arms-length pricing on transactions between related parties. 
B) Reallocation of income,deductions,etc. ,by a taxpayer to minimize tax liability. 
C) Application to transactions between unrelated parties. 
D) All of the above. 
E) None of the above.

Question 16

U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

Accepted Answer

A) True 
 B)False

Question 17

Shannon,a foreign person with a green card,spends the following days in the United States.

Shannon's residency status for 2010 is:

Accepted Answer

A) U.S.resident since she was a U.S.resident for the past immediately preceding two years. 
B) U.S.resident because she has a green card. 
C) Not a U.S.resident because Shannon was not in the United states for at least 31 days during 2010. 
D) Not a U.S.resident since,using the three-year test,Shannon is not present in the United states for at least 183 days.

Question 18

Which of the following statements regarding translation of foreign taxes is true?

Accepted Answer

A) Foreign taxes are typically paid in a foreign currency and thus must be converted to U.S.dollars when used as a FTC on a U.S.return. 
B) Foreign taxes are translated into U.S.dollars only when such translation provides a tax benefit to the taxpayer. 
C) Translation of foreign taxes into U.S.dollars helps manage the U.S.balance of trade. 
D) Translation of foreign taxes into U.S.dollars encourages foreign corporations to set up operations in the United States.

Question 19

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 20

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

BendCo,Inc. ,a U.S.corporation,has foreign-source income and pays foreign taxes as follows. BendCo's worldwide taxable income is $1,600,000 and U.S.taxes before FTC are $560,000 (assume 35%).What is BendCo's U.S.tax liability after the FTC?

The source of income received for the use of intangible property is the country in which the owner of the property producing the income is resident.

USCo,a domestic corporation,purchases inventory for resale from distributors within the U.S.and resells this inventory to customers outside the U.S.with title passing outside the U.S.What is the source of the USCo's inventory sales income?

Twelve unrelated U.S.persons own a foreign corporation equally.The foreign corporation is a CFC.

During 2010,Martina,an NRA,receives interest income of $50,000 from Collins,Inc. ,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

Which of the following statements regarding income sourcing is correct?

Which of the following statements regarding the sourcing of gross income is true?

A nonresident alien realizes a gain on the sale of commercial real estate located in Cleveland,Ohio.The real estate was sold to his cousin who is also a nonresident alien.The seller has foreign-source income from the sale because the seller is a foreign resident.

BrazilCo,Inc. ,a foreign corporation with a U.S.trade or business,has U.S.-source income as follows.

Which of the following statements regarding income sourcing is not correct?

Which of the following determinations does not require knowing the amounts of one's U.S.- versus foreign-source income?

Section 482 is used to:

U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).

Shannon,a foreign person with a green card,spends the following days in the United States. Shannon's residency status for 2010 is:

Which of the following statements regarding translation of foreign taxes is true?

Gains on the sale of U.S.real property held directly or indirectly through U.S.stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.