Question 1

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) A) and D)
F) B) and D)

Question 2

Goolsbee,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value)are as follows.
  Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Accepted Answer

Using the asset method and the...

Question 3

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Accepted Answer

A)   Foreign persons with only foreign activities.
B)   U.S. persons with U.S. and foreign activities.
C)   U.S. persons with only U.S. activities.
D)   U.S. persons that earn only tax-exempt income.E) B) and C)
F) C) and D)

Question 4

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) C) and D)
G) A) and B)

Question 5

Hickman,Inc.,a U.S.corporation,operates an unincorporated branch manufacturing operation in the United Kingdom.Hickman,Inc.,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return along with $1,300,000 of taxable income from its U.S.operations.Hickman paid $270,000 in U.K.income taxes related to the $900,000 in branch income.Assuming a U.S.tax rate of 35%,what is Hickman's U.S.tax liability after any allowable foreign tax credits?

Accepted Answer

A)   $0.
B)   $455,000.
C)   $500,000.
D)   $770,000.
E)   Some other amount.F) All of the above
G) A) and B)

Question 6

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Accepted Answer

A) True 
 B)False

Question 7

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.E) A) and C)
F) C) and D)

Question 8

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

Accepted Answer

A)   $0.
B)   $19,200.
C)   $60,800.
D)   $80,000.E) A) and B)
F) A) and C)

Question 9

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

Question 10

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

Accepted Answer

A) True 
 B)False

Question 11

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 B)
F) All of the above A

Question 12

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  False

Question 13

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)   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.
C)   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.
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 B)
G) B) and D)

Question 14

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of the income-producing assets.

Accepted Answer

A) True 
 B)False

Question 15

Present,Inc.,a domestic corporation,owns 60% of the stock of Past,Inc.,a foreign corporation.For the current year,Present receives a dividend of $80,000 from Past.Past's pools of post-'86 E & P (after taxes)and foreign taxes are $4,000,000 and $500,000,respectively.What is Present's total gross income from this dividend if it elects to claim the FTC for deemed-paid foreign taxes?

Accepted Answer

Dividend income is "grossed up...

Question 16

USCo,a domestic corporation,has worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's post-1986 undistributed earnings and profits are $16 million and it has paid $10 million 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)   $10 million.
B)   $16 million.
C)   $187,500.
D)   $487,500.E) B) and C)
F) A) and B)

Question 17

Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

Accepted Answer

A)   Foreign persons are not subject to U.S. tax if not engaged in a U.S. trade or business.
B)   Foreign persons with any U.S.-source income are taxed on net investment income (after expenses) .
C)   Foreign persons are subject to potential withholding taxes on the gross amount of U.S.-source investment income.
D)   Foreign persons with only U.S.-source investment income are exempt from U.S. tax.
E)   None of the above statements are true.F) B) and E)
G) A) and D) C

Question 18

Unused foreign tax credits are carried back one year and then forward 10 years.

Accepted Answer

A) True 
 B)False

Question 19

The purpose of the deemed paid foreign tax credit is:

Accepted Answer

A)   To allow foreign corporations to compete fairly with U.S. corporations doing business in the foreign jurisdiction.
B)   To allow U.S. corporations operating through foreign subsidiaries to receive a foreign tax credit for income taxes paid by their subsidiaries.
C)   To allow U.S. corporations operating through foreign branches to receive a foreign tax credit for income taxes paid by their branches.
D)   To allow U.S. corporations to compete fairly with foreign corporations doing business in the United States.E) A) and D)
F) B) and C)

Question 20

Assuming all sales are made to unrelated customers outside the CFC's country of incorporation,which of the following types of income earned by a CFC is Subpart F income?

Accepted Answer

A)   Income from sale of property manufactured by the CFC.
B)   Income from the sale of property manufactured by a subsidiary of the CFC in the same country as the CFC.
C)   Income from the sale of property manufactured by the U.S. parent of the CFC outside the CFC's country.
D)   Income from the sale of property manufactured by an unrelated person outside the CFC's country of incorporation.E) All of the above
F) None of the above

Exam 25: Taxation of International Transactions

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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Goolsbee,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value)are as follows. Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Correct Answer
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Using the asset method and the...
View Answer

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

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

Correct Answer
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Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

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

Correct Answer
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GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

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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U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

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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A

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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False

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

Correct Answer
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In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of the income-producing assets.

Correct Answer
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Correct Answer
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Dividend income is "grossed up...
View Answer

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Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

Correct Answer
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C

Unused foreign tax credits are carried back one year and then forward 10 years.

Correct Answer
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The purpose of the deemed paid foreign tax credit is:

Correct Answer
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Assuming all sales are made to unrelated customers outside the CFC's country of incorporation,which of the following types of income earned by a CFC is Subpart F income?

Correct Answer
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Exam 25: Taxation of International Transactions

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

Goolsbee,Inc.,a domestic corporation,generates U.S.-source and foreign-source gross income.Goolsbee's assets (tax book value)are as follows. Goolsbee incurs interest expense of $200,000.Using the asset method and the tax book value,apportion interest expense to foreign-source income.

Correct AnswerverifiedUsing the asset method and the...View AnswerShow Answer

Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Hendricks Corporation,a domestic corporation,owns 40 percent of Shane Corporation and 55 percent of Ferrell Corporation,both foreign corporations.Ferrell owns the other 60 percent of Shane Corporation.Both Shane and Ferrell are CFCs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

GlobalCo,a foreign corporation not engaged in a U.S.trade or business,receives $80,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 24% of its income from foreign sources.How much of GlobalCo's interest income is U.S.source?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S.individuals who receive dividends from foreign corporations may claim the deemed-paid foreign tax credit related to such dividends.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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 AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

In allocating interest expense between U.S.and foreign sources,a taxpayer must use the tax basis of the income-producing assets.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDividend income is "grossed up...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding foreign persons not engaged in a U.S.trade or business is true?

Correct AnswerverifiedC

Unused foreign tax credits are carried back one year and then forward 10 years.

Correct AnswerverifiedShow Answer

The purpose of the deemed paid foreign tax credit is:

Correct AnswerverifiedShow Answer

Assuming all sales are made to unrelated customers outside the CFC's country of incorporation,which of the following types of income earned by a CFC is Subpart F income?

Correct AnswerverifiedShow Answer

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Using the asset method and the...
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A

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False

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Dividend income is "grossed up...
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C

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