Question 1

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)   50% foreign source and 50% sourced based on location of manufacturing assets.
C)   100% U.S. source.
D)   100% foreign source.E) All of the above
F) A) and D)

Question 2

In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?

Accepted Answer

A)   The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Mike is a foreign resident and citizen.
B)   The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. David is married to Kathy. Mike is a foreign resident and citizen.
C)   The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, and Ben are all U.S. citizens. Ben is Mike's son. Mike is a foreign resident and citizen.
D)   The stock is directly owned 12% by Jen, 10% by Kathy, 12% by Leslie, 10% by David, 8% by Ben, and 48% by Mike. Jen, Kathy, Leslie, David, Ben, and Mike are all U.S. citizens.E) A) and B)
F) None of the above

Question 3

Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S. parent and sale to:

Accepted Answer

A)   Anyone inside the CFC country.
B)   Anyone outside the CFC country.
C)   A related party outside the CFC country.
D)   A non-related party outside the CFC country.E) B) and D)
F) None of the above

Question 4

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S. is true?

Accepted Answer

A)   If title passes on the inventory outside the U.S., all of the inventory income is foreign source.
B)   Because the inventory is manufactured in the U.S., all of the inventory income is U.S. source.
C)   The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on location of production assets.
D)   The taxpayer may use the 50-50 method to source one-half the income based on title passage and one-half the income based on where the sale negotiation takes place.E) B) and D)
F) None of the above

Question 5

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 6

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 foreign earned income exclusion.
D)   Calculation of a U.S. person's total taxable income.E) A) and D)
F) A) and C)

Question 7

Match the definition with the correct term.

Accepted Answer

The answer of Match the definition with the correct term.
...

Question 8

Given the following information, determine whether Greta, an alien, is a U.S. resident for 2012. Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

Accepted Answer

For Federal income tax purposes, Greta i...

Question 9

KeenCo, a domestic corporation, is the sole shareholder of LovettCo, a controlled foreign corporation. LovettCo has $250,000 in E & P attributable to income not previously taxed to KeenCo and $200,000 E & P attributable to income taxed to the U.S. shareholder as Subpart F income. LovettCo makes a $125,000 dividend distribution to KeenCo. Ignoring any deemed paid credit implications, what is the U.S. gross income to KeenCo resulting from this dividend?

Accepted Answer

$0. A controlled foreign corporation mus...

Question 10

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, or constructively at least 10% of the voting power or value of a foreign corporation.

Accepted Answer

A) True 
 B)False

Question 11

Steve, Inc., a U.S. shareholder owns 100% of a CFC from which Steve receives a $3 million cash distribution. The CFC's E & P is composed of the following amounts.  Steve recognizes a taxable dividend of:

Accepted Answer

A)   $3 million.
B)   $2 million.
C)   $1.5 million.
D)   $0.E) All of the above
F) A) and C)

Question 12

RainCo, a domestic corporation, owns a number of patents related to designing umbrellas. RainCo licenses these patents to unrelated parties. TexCo, a domestic corporation, paid RainCo $100,000 in royalties related to these licenses. TexCo uses the patent information in its manufacturing process in its Canadian plant. IrishCo, an Irish corporation, paid RainCo $25,000 in royalties related to the licenses. IrishCo uses the patent information in its manufacturing process in its Michigan manufacturing plant. How much foreign-source royalty income did RainCo earn from these licenses?

Accepted Answer

A)   $0.
B)   $25,000.
C)   $100,000.
D)   $125,000.E) A) and B)
F) A) and C)

Question 13

ForCo, a foreign corporation not engaged in a U.S. trade or business, recognizes a $3 million gain from the sale of land located in the United States. The amount realized on the sale was $50 million. Absent any exceptions, what is the required withholding amount on the part of the purchaser of this land?

Accepted Answer

A)   $0.
B)   $300,000.
C)   $500,000.
D)   $3 million.
E)   $5 million.F) B) and E)
G) C) and D)

Question 14

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Accepted Answer

A)   Itemized deductions.
B)   Foreign tax credit.
C)   Calculation of a U.S. person's total taxable income.
D)   Calculation of a U.S. person's deductible interest expense.E) A) and D)
F) All of the above

Question 15

OutCo, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year. OutCo's current year E & P is $250,000 and its accumulated E & P is $18 million. What is the current year Subpart F deemed dividend to USCo?

Accepted Answer

A)   $250,000.
B)   $650,000.
C)   $900,000.
D)   $18 million.E) A) and D)
F) All of the above

Question 16

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo has historically earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.-source?

Accepted Answer

A)   $0.
B)   $10,500.
C)   $39,500.
D)   $50,000.E) A) and B)
F) All of the above

Question 17

An advance pricing agreement (APA)  is used between:

Accepted Answer

A)   Two or more governments.
B)   Two related taxpayers.
C)   The taxpayer and the IRS.
D)   The IRS and U.S. taxing authorities.E) B) and D)
F) C) and D)

Question 18

Old, Inc., a U.S. corporation, earns foreign-source income classified in two different limitation baskets in the current year. It earns $20,000 in passive income and suffers a net loss of $45,000 in the general limitation basket. What is the numerator of the FTC limitation formula for the passive basket in the current year?

Accepted Answer

A)   ($25,000) .
B)   $0.
C)   $20,000.
D)   $25,000.E) None of the above
F) B) and C)

Question 19

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.E) B) and D)
F) A) and D)

Question 20

Which of the following transactions, if entered into by an NRA, is not subject to U.S. taxation?

Accepted Answer

A)   Sale of a commercial building located in Houston, Texas, and owned directly by the NRA.
B)   Sale of stock of a foreign corporation whose only asset is a U.S. building.
C)   Sale of stock of a domestic corporation whose only asset is undeveloped U.S. real estate.
D)   Sale of partnership interest. The partnership's assets predominantly are made up of U.S. real estate.E) A) and C)
F) C) and D)

Exam 9: Taxation of International Transactions

Correct Answer
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$0. A controlled foreign corporation mus...
View Answer

Correct Answer
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Which of the following transactions, if entered into by an NRA, is not subject to U.S. taxation?

Correct Answer
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Given the following information, determine whether Greta, an alien, is a U.S. resident for 2012. Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

Correct Answer
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For Federal income tax purposes, Greta i...
View Answer

OutCo, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year. OutCo's current year E & P is $250,000 and its accumulated E & P is $18 million. What is the current year Subpart F deemed dividend to USCo?

Correct Answer
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An advance pricing agreement (APA) is used between:

Correct Answer
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Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S. parent and sale to:

Correct Answer
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Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S. is true?

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

Correct Answer
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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.

Correct Answer
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ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo has historically earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.-source?

Correct Answer
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Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Correct Answer
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Steve, Inc., a U.S. shareholder owns 100% of a CFC from which Steve receives a $3 million cash distribution. The CFC's E & P is composed of the following amounts. Steve recognizes a taxable dividend of:

Correct Answer
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Correct Answer
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A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, or constructively at least 10% of the voting power or value of a foreign corporation.

Correct Answer
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In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?

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

Correct Answer
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Match the definition with the correct term.

Correct Answer
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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?

Correct Answer
verified

Exam 9: Taxation of International Transactions

Correct Answerverified$0. A controlled foreign corporation mus...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following transactions, if entered into by an NRA, is not subject to U.S. taxation?

Correct AnswerverifiedShow Answer

Given the following information, determine whether Greta, an alien, is a U.S. resident for 2012. Assume that Greta cannot establish a tax home in or a closer connection to a foreign country.

Correct AnswerverifiedFor Federal income tax purposes, Greta i...View AnswerShow Answer

OutCo, a controlled foreign corporation owned 100% by USCo, earned $900,000 in Subpart F income for the current year. OutCo's current year E & P is $250,000 and its accumulated E & P is $18 million. What is the current year Subpart F deemed dividend to USCo?

Correct AnswerverifiedShow Answer

An advance pricing agreement (APA) is used between:

Correct AnswerverifiedShow Answer

Which of the following income items does not represent Subpart F income if earned by a CFC? Purchase of inventory from a U.S. parent and sale to:

Correct AnswerverifiedShow Answer

Which of the following statements concerning the sourcing of income from inventory produced by the taxpayer in the U.S. and sold outside the U.S. is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo has historically earned 79% of its gross income from active foreign-source business income. What amount of ForCo's interest income is U.S.-source?

Correct AnswerverifiedShow Answer

Which of the following determinations requires knowing the amount of one's foreign-source gross income?

Correct AnswerverifiedShow Answer

Steve, Inc., a U.S. shareholder owns 100% of a CFC from which Steve receives a $3 million cash distribution. The CFC's E & P is composed of the following amounts. Steve recognizes a taxable dividend of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A "U.S. shareholder" for purposes of CFC classification is any U.S. person who owns directly, indirectly, or constructively at least 10% of the voting power or value of a foreign corporation.

Correct AnswerverifiedShow Answer

In which of the following independent situations would a foreign corporation be classified as a controlled foreign corporation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the definition with the correct term.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Correct Answer
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$0. A controlled foreign corporation mus...
View Answer

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For Federal income tax purposes, Greta i...
View Answer

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