Question 1

A non-U.S. individual's "green card" remains in effect until:

Accepted Answer

A)   The individual discards it.
B)   The individual leaves the United States
C)   The individual remains outside the United States for two years.
D)   The card has been revoked or the individual has abandoned lawful permanent residency in the U.S.E) A) and B)
F) A) and C)

Question 2

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Accepted Answer

A) True 
 B)False

Question 3

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Accepted Answer

A)   $100,000.
B)   $28,000.
C)   $18,000.
D)   $0.E) B) and D)
F) None of the above

Question 4

Which of the following is not a U.S. person?

Accepted Answer

A)   Domestic corporation.
B)   Citizen of Turkey with U.S. permanent residence status (i.e., green card) .
C)   U.S. corporation 100% owned by a foreign corporation.
D)   Foreign corporation 100% owned by a domestic corporation.E) None of the above
F) A) and B)

Question 5

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

Question 6

A U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Accepted Answer

A)   Repatriating more foreign income to the United States in the year there is an excess limitation.
B)   Deducting the excess foreign taxes that do not qualify for the credit.
C)   Generating "same basket" foreign-source income that is subject to a tax rate lower than the U.S. tax rate.
D)   Generating "same basket" foreign-source income that is subject to a tax rate higher than the U.S. tax rate.E) None of the above
F) B) and C)

Question 7

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

Accepted Answer

A)   All else equal, a U.S. corporation prefers that more of its U.S. taxable income be characterized as foreign source, to increase its foreign tax credit limitation.
B)   All else equal, a U.S. corporation prefers that less of its U.S. taxable income be characterized as foreign-source, to increase its foreign tax credit limitation.
C)   All trade or business income earned by a U.S. corporation is treated as U.S.-source income.
D)   All investment income earned by a U.S. corporation is treated as U.S.-source income.E) A) and B)
F) B) and C)

Question 8

Copp, Inc., a domestic corporation, owns 30% of a CFC that has $50 million of earnings and profits for the current year. Included in that amount is $20 million of Subpart F income. Copp has been a CFC for the entire year and makes no distributions in the current year. Copp must include in gross income (before any § 78 gross-up) :

Accepted Answer

A)   $0.
B)   $50 million.
C)   $20 million.
D)   $6 million.E) A) and B)
F) A) and C)

Question 9

SunCo, a domestic corporation, owns a number of patents related to designing sunglasses. SunCo licenses these patents to unrelated parties. SpainCo, a Spanish corporation, paid SunCo $78,000 in royalties related to these licenses. SpainCo uses the patent information in its manufacturing process in its Texas plant. WiscCo, a domestic corporation, paid SunCo $32,000 in royalties related to the licenses. WiscCo uses the patent information in its manufacturing process in its German manufacturing plant. How much foreign-source royalty income did SunCo earn from these licenses?

Accepted Answer

A)   $0.
B)   $32,000.
C)   $78,000.
D)   $110,000.E) B) and C)
F) A) and D)

Question 10

All of an NRA's U.S.-source income that is not effectively connected with a U.S. trade or business is subject to a flat U.S. income tax rate of 30%, unless the tax rate is modified by a treaty.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following foreign taxes paid by a U.S. corporation is eligible for the foreign tax credit?

Accepted Answer

A)   Real property taxes.
B)   Value added taxes.
C)   Dividend withholding taxes.
D)   Sales taxes.E) A) and B)
F) A) and C)

Question 12

A controlled foreign corporation (CFC)  realizes Subpart F income from:

Accepted Answer

A)   Purchase of inventory from unrelated party and sale outside the CFC country.
B)   Purchase of inventory from a related party and sale outside the CFC country.
C)   Services performed for the U.S. parent in a country in which the CFC was organized.
D)   Services performed on behalf of an unrelated party in a country outside the country in which the CFC was organized.
E)   None of the above transactions.F) None of the above
G) A) and B)

Question 13

USCo has foreign-source income from a manufacturing operation, from sales of the manufactured goods, and from stocks and bonds held for investment. How many categories or "baskets" of income does USCo have for foreign tax credit limitation purposes?

Accepted Answer

A)   One.
B)   Two.
C)   Three.
D)   Four.E) A) and B)
F) All of the above

Question 14

Which of the following transactions by a U.S. corporation may result in taxation under § 367?

Accepted Answer

A)   Incorporation of U.S branch as a U.S. corporation when the branch earns foreign-source income.
B)   Incorporation of a U.S. branch as a U.S. corporation if the new U.S. corporation also has foreign shareholders.
C)   Incorporation of a U.S. branch as a U.S. corporation if the new U.S. corporation has no foreign shareholders.
D)   All the above.
E)   None of the above.F) D) and E)
G) B) and C)

Question 15

Which of the following would not prevent an alien without a "green card" from being classified as a U.S. resident for income tax purposes?

Accepted Answer

A)   The individual was in the United States to oversee her investments.
B)   The individual was prevented from leaving the United States due to an illness which arose while in the United States.
C)   The individual is a foreign consul assigned to the United States.
D)   The individual commutes daily from Mexico to the United States to work.E) A) and B)
F) B) and D)

Question 16

USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Accepted Answer

A)   $245,000.
B)   $70,000.
C)   $175,000.
D)   $770,000.E) All of the above
F) A) and C)

Question 17

USCo, a domestic corporation, has worldwide taxable income of $500,000, including a $100,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's post-1986 undistributed earnings and profits are $1 million and it has paid $200,000 of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

Accepted Answer

A)   $200,000.
B)   $120,000.
C)   $800,000.
D)   $20,000.E) C) and D)
F) B) and D)

Question 18

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

Accepted Answer

A)   Dividends are sourced based on the residence of the recipient.
B)   Dividends from a U.S. corporation are U.S. source, without regard to whether the U.S. corporation is an 80-20 company.
C)   Dividends from a U.S. corporation are foreign-source, if the U.S. corporation is an 80-20 company.
D)   Dividends from a U.S. corporation are foreign-source based on the percentage of foreign-source income earned by the U.S. payor.E) None of the above
F) B) and C)

Question 19

Flan, a U.S. corporation, reports $250,000 interest expense for the tax year. None of the interest relates to nonrecourse debt or loans from affiliated corporations. Flan's U.S. and foreign assets are as follows.  How should Flan assign its interest expense between U.S. and foreign sources to maximize its FTC for the current year?

Accepted Answer

A)   Using tax book values.
B)   Using tax book value for U.S. source and fair market value for foreign source.
C)   Using fair market value.
D)   Using fair market value for U.S. source and tax book value for foreign source.E) A) and B)
F) A) and C)

Question 20

Which of the following items of CFC income constitute foreign base company sales income?

Accepted Answer

A)   Sale of inventory property purchased from the CFC's U.S. parent company and sold to related parties within the CFC's country of incorporation.
B)   Sale of inventory property purchased from the CFC's U.S. parent company and sold to unrelated parties within the CFC's country of incorporation.
C)   Sale of inventory property purchased from the CFC's U.S. parent company and sold to related parties outside the CFC's country of incorporation.
D)   Sale of inventory property purchased from unrelated parties and sold to related parties within the CFC's country of incorporation.E) A) and B)
F) C) and D)

Exam 9: Taxation of International Transactions

Which of the following transactions by a U.S. corporation may result in taxation under § 367?

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

Correct Answer
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The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

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

Correct Answer
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Which of the following items of CFC income constitute foreign base company sales income?

Correct Answer
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ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Correct Answer
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A U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Correct Answer
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USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Correct Answer
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A controlled foreign corporation (CFC) realizes Subpart F income from:

Correct Answer
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A non-U.S. individual's "green card" remains in effect until:

Correct Answer
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Which of the following is not a U.S. person?

Correct Answer
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All of an NRA's U.S.-source income that is not effectively connected with a U.S. trade or business is subject to a flat U.S. income tax rate of 30%, unless the tax rate is modified by a treaty.

Correct Answer
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Which of the following foreign taxes paid by a U.S. corporation is eligible for the foreign tax credit?

Correct Answer
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USCo has foreign-source income from a manufacturing operation, from sales of the manufactured goods, and from stocks and bonds held for investment. How many categories or "baskets" of income does USCo have for foreign tax credit limitation purposes?

Correct Answer
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Which of the following would not prevent an alien without a "green card" from being classified as a U.S. resident for income tax purposes?

Correct Answer
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Which of the following statements regarding the sourcing of dividend income is true?

Correct Answer
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Exam 9: Taxation of International Transactions

Which of the following transactions by a U.S. corporation may result in taxation under § 367?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following items of CFC income constitute foreign base company sales income?

Correct AnswerverifiedShow Answer

ForCo, a foreign corporation, receives interest income of $100,000 from USCo, an unrelated domestic corporation. USCo has historically earned 85% of its income from foreign sources. What amount of ForCo's interest income is U.S. source?

Correct AnswerverifiedShow Answer

A U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Correct AnswerverifiedShow Answer

USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?

Correct AnswerverifiedShow Answer

A controlled foreign corporation (CFC) realizes Subpart F income from:

Correct AnswerverifiedShow Answer

A non-U.S. individual's "green card" remains in effect until:

Correct AnswerverifiedShow Answer

Which of the following is not a U.S. person?

Correct AnswerverifiedShow Answer

All of an NRA's U.S.-source income that is not effectively connected with a U.S. trade or business is subject to a flat U.S. income tax rate of 30%, unless the tax rate is modified by a treaty.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following foreign taxes paid by a U.S. corporation is eligible for the foreign tax credit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

USCo has foreign-source income from a manufacturing operation, from sales of the manufactured goods, and from stocks and bonds held for investment. How many categories or "baskets" of income does USCo have for foreign tax credit limitation purposes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would not prevent an alien without a "green card" from being classified as a U.S. resident for income tax purposes?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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