Question 1

Which of the following statements regarding the U.S.taxation of foreign persons is true?

Accepted Answer

A)  A foreign person's effectively connected income is subject to U.S.income taxation.
B)  A foreign person's effectively connected income is tax free unless it is portfolio income.
C)  A foreign person may earn income from U.S.real property without incurring any U.S.income tax.
D)  A foreign person must spend at least 183 days in the United States before any effectively connected income is subject to U.S.taxation.E) A) and D)
F) A) and C)

Question 2

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D)  The card has been revoked or the individual has abandoned lawful permanent residency in the U.S.E) A) and B)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) None of the above

Question 3

Which of the following statements regarding the taxation of U.S.real property gains recognized by foreign persons not engaged in a U.S.trade or business is false? Gains from the disposition of U.S.real property are:

Accepted Answer

A)  Taxed to foreign persons notwithstanding the general exemption of capital gains from U.S.taxation.
B)  Taxed to foreign persons without regard to whether such foreign persons are engaged in a U.S.trade or business.
C)  Taxed in the U.S.because such gains are treated as if they are effectively connected to a U.S.trade or business.
D)  Not taxed to foreign persons because real property gains are specifically exempt from U.S.taxation.E) None of the above
F) B) and D)

Question 4

Dividends received from Leprechaun,Ltd. ,an Irish corporation that earns 40% of its income from U.S.business activities,are 40% U.S.-source income.

Accepted Answer

A) True 
 B)False

Question 5

Dividends received from a domestic corporation are totally U.S.source:

Accepted Answer

A)  If the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business.
B)  If the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a U.S.trade or business.
C)  Unless the corporation earns at least 80% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business.
D)  Unless the corporation earns at least 25% of its gross income over the immediately preceding three tax years from the active conduct of a foreign trade or business.
E)  In all of the above cases.F) A) and E)
G) All of the above

Question 6

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 7

Chang,an NRA,is employed by Fisher,Inc. ,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Accepted Answer

A)  Chang has no U.S.-source income,under the commercial traveler exception.
B)  Chang has $3,000 U.S.-source income,since her foreign employer has a U.S.branch.
C)  Chang has $60,000 U.S.-source income which is exempt from U.S.taxation,since she is in the U.S.for 90 days or less.
D)  Chang has $60,000 U.S.-source income which is exempt from U.S.taxation,since she is working for a foreign employer.E) A) and D)
F) A) and C)

Question 8

Which of the following is not a foreign person?

Accepted Answer

A)  Foreign corporation 51% owned by U.S.shareholders.
B)  Foreign corporation 100% owned by a domestic corporation.
C)  Citizen of Germany with U.S.permanent resident status (i.e. ,green card) .
D)  Citizen of Italy who spends 14 days vacationing in the United States.E) All of the above
F) A) and C)

Question 9

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach,because only income earned within the U.S.border is subject to taxation.

Accepted Answer

A) True 
 B)False

Question 10

Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

Accepted Answer

A) True 
 B)False

Question 11

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) B) and C)
F) All of the above

Question 12

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.80€.Wood's exchange gain or loss is:

Accepted Answer

A)  $15,000 loss.
B)  $15,000 gain.
C)  $75,000 gain.
D)  $0.There is no exchange gain or loss on a dividend distribution.E) B) and C)
F) A) and B)

Question 13

WorldCo,a foreign corporation not engaged in a U.S.trade or business,receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?

Accepted Answer

A)  $0.
B)  $11,000.
C)  $39,000.
D)  $50,000.E) A) and C)
F) A) and B)

Question 14

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.LovettCo also holds $200,000 E & P attributable to income taxed to the U.S.shareholder as Subpart F income.LovettCo makes a $150,000 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 main...

Question 15

Fulton,Ltd. ,a foreign corporation,operates a U.S.branch that reports effectively connected U.S.earnings and profits (after income taxes) of $800,000 for the tax year.The branch's U.S.net equity at the beginning of the tax year is $2 million and at the end of the tax year is $1.5 million.Fulton is organized in a nontreaty country.Fulton's dividend equivalent amount for the year is:

Accepted Answer

A)  $1,300,000.
B)  $800,000.
C)  $500,000.
D)  $300,000.E) A) and B)
F) B) and C)

Question 16

With respect to income generated by non-U.S.persons,does the U.S.apply a "worldwide" or a "territorial" approach.Be specific.

Accepted Answer

The answer is "both." U.S.persons are su...

Question 17

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

Question 18

Which of the following is not a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Accepted Answer

A)  Intangibles income.
B)  Passive income.
C)  Business income.
D)  None of the above are separate FTC limitation baskets.
E)  All of the above are separate FTC limitation baskets.F) A) and C)
G) None of the above

Question 19

Young,Inc. ,a U.S.corporation,earns foreign-source income classified in two different income baskets in the current year.It earns $100,000 in passive foreign-source income and suffers a net loss of $70,000 in the general basket.What is the numerator of the FTC limitation formula for the passive basket in the current year?

Accepted Answer

A)  $0.
B)  $30,000.
C)  $70,000.
D)  $100,000.E) C) and D)
F) B) and C)

Question 20

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business claims effectively connected business deductions against that income.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach,because only income earned within the U.S.border is subject to taxation.

Correct Answer
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WorldCo,a foreign corporation not engaged in a U.S.trade or business,receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?

Correct Answer
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Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.80€.Wood's exchange gain or loss is:

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

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

Correct Answer
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Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

Correct Answer
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Dividends received from a domestic corporation are totally U.S.source:

Correct Answer
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Which of the following statements regarding the taxation of U.S.real property gains recognized by foreign persons not engaged in a U.S.trade or business is false? Gains from the disposition of U.S.real property are:

Correct Answer
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Dividends received from Leprechaun,Ltd. ,an Irish corporation that earns 40% of its income from U.S.business activities,are 40% U.S.-source income.

Correct Answer
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Correct Answer
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A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business claims effectively connected business deductions against that income.

Correct Answer
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With respect to income generated by non-U.S.persons,does the U.S.apply a "worldwide" or a "territorial" approach.Be specific.

Correct Answer
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The answer is "both." U.S.persons are su...
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Which of the following is not a foreign person?

Correct Answer
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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
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Which of the following is not a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Correct Answer
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Chang,an NRA,is employed by Fisher,Inc. ,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Correct Answer
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Which of the following statements regarding the U.S.taxation of foreign persons is true?

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

Exam 9: Taxation of International Transactions

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach,because only income earned within the U.S.border is subject to taxation.

Correct AnswerverifiedShow Answer

WorldCo,a foreign corporation not engaged in a U.S.trade or business,receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?

Correct AnswerverifiedShow Answer

Wood,a U.S.corporation,owns Holz,a German corporation.Wood receives a dividend (non-Subpart F income) from Holz of 75,000€.The average exchange rate for the year is $1US: 0.6€,and the exchange rate on the date of the dividend distribution is $1US: 0.80€.Wood's exchange gain or loss is:

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

Correct AnswerverifiedShow Answer

Dividends received from a domestic corporation are totally U.S.source:

Correct AnswerverifiedShow Answer

Which of the following statements regarding the taxation of U.S.real property gains recognized by foreign persons not engaged in a U.S.trade or business is false? Gains from the disposition of U.S.real property are:

Correct AnswerverifiedShow Answer

Dividends received from Leprechaun,Ltd. ,an Irish corporation that earns 40% of its income from U.S.business activities,are 40% U.S.-source income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A nonresident alien with U.S.-source income effectively connected with a U.S.trade or business claims effectively connected business deductions against that income.

Correct AnswerverifiedShow Answer

With respect to income generated by non-U.S.persons,does the U.S.apply a "worldwide" or a "territorial" approach.Be specific.

Correct AnswerverifiedThe answer is "both." U.S.persons are su...View AnswerShow Answer

Which of the following is not a foreign person?

Correct AnswerverifiedShow Answer

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

Which of the following is not a specific separate income "basket" for purposes of the foreign tax credit limitation calculation?

Correct AnswerverifiedShow Answer

Chang,an NRA,is employed by Fisher,Inc. ,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the U.S.taxation of foreign persons is true?

Correct AnswerverifiedShow Answer

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

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The answer is "both." U.S.persons are su...
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$0.A controlled foreign corporation main...
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