Question 1

All taxes paid to a foreign government by a U.S. individual are creditable on the individual's U.S. tax return.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following foreign taxes are not creditable for U.S. tax purposes?

Accepted Answer

A)  Direct taxes paid by a U.S. corporation on income earned in a foreign branch. 
B)  Income taxes paid to a foreign taxing authority on a dividend received by a U.S. corporation from its 100 percent owned foreign subsidiary. 
C)  Withholding taxes imposed on a dividend received by a U.S. corporation from its 100 percent owned foreign subsidiary. 
D)  All of these taxes are creditable.

Question 3

Before subpart F applies, a foreign corporation must be a CFC for how many consecutive days?

Accepted Answer

A)  1 
B)  30 
C)  183 
D)  365

Question 4

Spartan Corporation, a U.S. company, manufactures widgets for sale in the United States and Europe. All manufacturing activities take place in the United States. During the current year, Spartan sold 100,000 widgets to European customers at a price of $5 each. Each widget costs $2 to produce. All of Spartan's production assets are located in the United States. For each independent scenario, determine the source of the gross profit from sale of the widgets.
A. Spartan ships its widgets F.O.B., place of destination.
B. Spartan ships its widgets F.O.B., place of shipment.

Accepted Answer

The answer of Spartan Corporation, a U.S. company, manufactures widgets...

Question 5

Which of the following expenses incurred by a U.S. corporation is not subject to special apportionment rules for foreign tax credit purposes?

Accepted Answer

A)  Interest 
B)  Research and experimental 
C)  Advertising 
D)  State and local income taxes

Question 6

The United States generally taxes U.S. sourced fixed and determinable, annual or periodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income.

Accepted Answer

A) True 
 B)False

Question 7

Vintner, S.A., a French corporation, received the following sources of income during 2018:
$20,000 interest income from a loan to its 100 percent owned U.S. subsidiary
$30,000 dividend income from its 5 percent owned Canadian subsidiary
$100,000 royalty income from its Irish subsidiary for use of a trademark within the United States
$100,000 rent income from its Mexican subsidiary for use of a warehouse located in Arizona
$50,000 capital gain from sale of stock in its 40 percent owned German joint venture. Title passed in the United States.
What amount of U.S. source income does Vintner have in 2018?

Accepted Answer

The answer of Vintner, S.A., a French corporation, received the...

Question 8

Pierre Corporation has a precredit U.S. tax of $315,000 on $1,500,000 of taxable income in 2018. Pierre has $300,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income. Pierre paid $60,000 of foreign income taxes on the foreign branch income and $15,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Pierre use on its 2018 U.S. tax return and what is the amount of the carryforward, if any?

Accepted Answer

A)  $315,000 FTC with $0 carryforward 
B)  $75,000 FTC with $0 carryforward 
C)  $13,500 FTC with $61,500 carryforward 
D)  $13,500 FTC with $0 carryforward

Question 9

Which of the following tax rules applies to an excess foreign tax credit (FTC) that arises in 2018?

Accepted Answer

A)  The excess FTC is first carried back to 2017 and any excess is carried forward for 10 years. 
B)  The excess FTC is first carried back to 2016, then 2017, and any excess is carried forward for 20 years. 
C)  The excess FTC is first carried back to 2015, then 2016, then 2017, and any excess is carried forward for 5 years. 
D)  The excess FTC is carried forward 10 years, with no carryback allowed.

Question 10

Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes?

Accepted Answer

A)  Income tax paid to the government of Portugal 
B)  Income tax paid to the city of Amsterdam 
C)  Value-added tax paid to the government of France 
D)  All of these taxes are creditable

Question 11

Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark?

Accepted Answer

A)  30% 
B)  15% 
C)  5% 
D)  0%

Question 12

Bismarck Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in 2018. Bismarck has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign source taxable income characterized as passive category income. Bismarck paid $80,000 of foreign income taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Bismarck use on its 2018 U.S. tax return and what is the amount of the carryforward, if any?

Accepted Answer

A)  $90,000 FTC with $0 carryforward 
B)  $52,000 FTC with $0 carryforward 
C)  $52,000 FTC with $38,000 carryforward 
D)  $16,500 FTC with $73,500 carryforward

Question 13

Jesse Stone is a citizen and bona fide resident of Great Britain. During 2018, Jesse received the following income:
Compensation of $10 million from performing concerts in the United States
Cash dividends of $20,000 from a U.S. corporation
Interest of $1,000 from a U.S. citizen who is a resident of Ireland
Rent of $10,000 from British residents who rented Jesse's townhouse in Orlando, Florida
Gain of $50,000 on the sale of stock in a U.S. corporation
Determine the source (U.S. or foreign) of each item of income Jesse received in 2018.

Accepted Answer

The answer of Jesse Stone is a citizen and bona...

Question 14

One of the tax advantages to an individual using a corporation through which to earn income in Germany is deferral of U.S. taxation on active business income earned by the corporation until such income is remitted back to the United States.

Accepted Answer

A) True 
 B)False

Question 15

Reno Corporation, a U.S. corporation, reported total taxable income of $6,000,000 in 2018. Taxable income included $1,800,000 of foreign source taxable income from the company's branch operations in Canada. All of the branch income is foreign branch income. Reno paid Canadian income taxes of $450,000 on its branch income. Compute Reno's net U.S. tax liability and any foreign tax credit carryover for 2018. Assume an exchange rate of C$1 = $1.

Accepted Answer

The answer of Reno Corporation, a U.S. corporation, reported total...

Question 16

Which of the following persons should not be treated as a "U.S. shareholder" of a controlled foreign corporation (CFC) for subpart F purposes?

Accepted Answer

A)  A U.S. citizen owning 5 percent of the CFC. 
B)  A U.S. citizen owning 15 percent of the CFC. 
C)  A U.S. corporation owning 15 percent of the CFC. 
D)  All of the above named persons are U.S. shareholders for subpart F purposes.

Question 17

Giselle is a citizen and resident of Brazil, a country with which the United States does not have an income tax treaty. Giselle earned $24,000 of compensation while working within the United States. She worked 60 days in the United States and 180 days in Brazil. How much of her compensation earned in the United States will be subject to U.S. tax?

Accepted Answer

A)  $24,000 
B)  $8,000 
C)  $6,000 
D)  $0

Question 18

The foreign tax credit regime is the primary mechanism used by the United States government to mitigate or eliminate the potential double taxation of income earned by U.S. individuals outside the United States.

Accepted Answer

A) True 
 B)False

Question 19

Ypsi Corporation has a precredit U.S. tax of $420,000 on $2,000,000 of taxable income in 2018. Ypsi has $400,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income. Ypsi paid $100,000 of foreign income taxes on the foreign branch income and $30,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Ypsi use on its 2018 U.S. tax return and what is the amount of the FTC carryforward, if any?

Accepted Answer

The answer of Ypsi Corporation has a precredit U.S. tax...

Question 20

Philippe is a French citizen. During 2018 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2018, he will not under any circumstances be treated as a resident alien for U.S. tax purposes.

Accepted Answer

A) True 
 B)False

Exam 24: The Us Taxation of Multinational Transactions

All taxes paid to a foreign government by a U.S. individual are creditable on the individual's U.S. tax return.

Which of the following foreign taxes are not creditable for U.S. tax purposes?

Before subpart F applies, a foreign corporation must be a CFC for how many consecutive days?

Which of the following expenses incurred by a U.S. corporation is not subject to special apportionment rules for foreign tax credit purposes?

The United States generally taxes U.S. sourced fixed and determinable, annual or periodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income.

Which of the following tax rules applies to an excess foreign tax credit (FTC) that arises in 2018?

Which of the following foreign taxes is not a creditable foreign tax for U.S. tax purposes?

Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark?

One of the tax advantages to an individual using a corporation through which to earn income in Germany is deferral of U.S. taxation on active business income earned by the corporation until such income is remitted back to the United States.

Which of the following persons should not be treated as a "U.S. shareholder" of a controlled foreign corporation (CFC) for subpart F purposes?

The foreign tax credit regime is the primary mechanism used by the United States government to mitigate or eliminate the potential double taxation of income earned by U.S. individuals outside the United States.

Philippe is a French citizen. During 2018 he spent 150 days in the United States on business. Because Philippe does not spend 183 days in the United States in 2018, he will not under any circumstances be treated as a resident alien for U.S. tax purposes.