Question 1

ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has 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)   $50,000E) A) and B)
F) B) and C)

Question 2

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 non- U.S. non-taxing authorities.E) A) and B)
F) All of the above

Question 3

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-Owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation.

Accepted Answer

A)  Foreign base company income
B)  Foreign personal holding company income
C)  Controlled foreign corporation
D)  U.S. shareholder
E)  Previously taxed incomeF) More than 10 percentG) More than 50 percentH) More than 80 percentI) None of the above
J) B) and G)

Question 4

Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

Accepted Answer

A)   Non-U.S. persons may be subject to U.S. withholding tax on U.S.-source investment income.
B)   Non-U.S. individuals may be subject to U.S. income tax but non-U.S. corporations are never subject to U.S. income tax.
C)   Non-U.S. persons are subject to U.S. income or withholding tax only if engaged in a U.S. trade or business.
D)   Non-U.S. persons must be physically present in the United States before any U.S.-source income is subject to U.S. income or withholding tax.E) A) and C)
F) A) and B)

Question 5

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 subject to potential withholding taxes on the gross amount of U.S.-source investment income.
B)   Foreign persons with any U.S.-source income are taxed on net investment income after expenses) .
C)   Foreign persons are not subject to U.S. tax if not engaged in a U.S. trade or business.
D)   Foreign persons with only U.S.-source investment income are exempt from U.S. tax.E) All of the above
F) C) and D)

Question 6

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 non-U.S. corporations are always foreign source.
C)   Dividends from non-U.S. corporations are foreign-source only to the extent that 80% or more of the non-U.S. corporation's gross income for the three years preceding the year of the dividend payment was effectively connected with the conduct of a non-U.S. trade or business.
D)   A percentage of dividends from non-U.S. corporations are U.S. source to the extent that 25% or more of the non-U.S. corporation's gross income for the three years preceding the year of the dividend payment was effectively connected with the conduct of a U.S. trade or business.E) A) and C)
F) B) and D)

Question 7

Which of the following statements regarding the taxation of U.S. real property gains recognized by non-U.S. 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)   Not taxed to non-U.S. persons because real property gains are specifically exempt from U.S. taxation.
B)   Taxed to non-U.S. persons without regard to whether such non-U.S. persons are engaged in a U.S. trade or business.
C)   Taxed in the United States because such gains are treated as if they are effectively connected to a U.S. trade or business.
D)   Taxed to non-U.S. persons notwithstanding the general exemption of capital gains from U.S. taxation.E) B) and C)
F) A) and B)

Question 8

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization.
The resulting realized gain is tax-deferred under U.S. income tax law using §§ 351 and 368.

Accepted Answer

A) True 
 B)False

Question 9

ForCo, a non-U.S. corporation based in Aldonza, purchases widgets from USCo, Inc., its U.S. parent corporation.
The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza. The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Accepted Answer

A) True 
 B)False

Question 10

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-Portfolio income treated as Subpart F income.

Accepted Answer

A)  Foreign base company income
B)  Foreign personal holding company income
C)  Controlled foreign corporation
D)  U.S. shareholder
E)  Previously taxed incomeF) More than 10 percentG) More than 50 percentH) More than 80 percentI) All of the above
J) D) and H)

Question 11

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.
Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $94,500 before FTC. Waltz's FTC is
$50,000.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)   Translation of foreign taxes into U.S. dollars helps manage the U.S. balance of trade.
B)   Foreign taxes are translated into U.S. dollars only when such translation provides a tax benefit to the taxpayer.
C)   Foreign taxes typically are paid in a foreign currency and, thus, must be converted to U.S. dollars when used as an FTC on a U.S. return.
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 13

Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

Accepted Answer

A)   Non-U.S. persons may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S. trade or business.
B)   Non-U.S. persons are subject to U.S. income or withholding tax only if they are engaged in a U.S. trade or business.
C)   Non-U.S. persons are not taxed on gains from U.S. real property as long as such property is not used in a U.S. trade or business.
D)   Once a non-U.S. person is engaged in a U.S. trade or business, the non-U.S. person's worldwide income is subject to U.S. taxation.E) A) and B)
F) All of the above

Question 14

Your client holds foreign tax credit FTC) carryforwards i.e., it is in an "excess credit" position.) Give at least three planning ideas that the client should implement to free up the suspended FTCs.

Accepted Answer

∙ Generate "same basket" foreign-source ...

Question 15

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

Accepted Answer

A)   A non-U.S. person's effectively connected U.S. business income is taxed by the United States only if it is portfolio income.
B)   A non-U.S. person's effectively connected U.S. business income is subject to U.S. income taxation.
C)   A non-U.S. person may earn income from selling U.S. real property without incurring any U.S. income tax.
D)   A non-U.S. 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 C)
F) A) and B)

Question 16

Generally, accrued foreign income taxes are translated at the:

Accepted Answer

A)   Exchange rate when the taxes are paid.
B)   Exchange rate on the date when the taxes are accrued.
C)   Average exchange rate for the tax year to which the taxes relate.
D)   Average exchange rate for the last five tax years.E) A) and D)
F) B) and C)

Question 17

Match the definition with the correct term.
-Method for sourcing income and deductions.

Accepted Answer

A)  Inbound
B)  Outbound
C)  Allocation and apportionment
D)  Qualified business unit
E)  Tax havenF) Income tax treatyG) Section 482H) A) and E)
I) A) 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 based on the percentage of U.S.-source income earned by the U.S. payor.
C)   Dividends from a U.S. corporation are U.S. source without regard to where the U.S. corporation generated the E & P.
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) C) and D)

Question 19

In allocating interest expense between U.S. and foreign sources, a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.

Accepted Answer

A) True 
 B)False

Question 20

A domestic corporation is one whose assets are primarily located in the United States. For this purpose, the
primarily located test greater than 50%) applies.

Accepted Answer

A) True 
 B)False

Exam 9: Taxation of International Transactions

ForCo, a non-U.S. corporation based in Aldonza, purchases widgets from USCo, Inc., its U.S. parent corporation. The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza. The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

Correct AnswerverifiedShow Answer

Match the definition with the correct term. -Method for sourcing income and deductions.

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ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an unrelated domestic corporation. USCo historically has 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 statements regarding the U.S. taxation of non-U.S. persons is true?

Correct AnswerverifiedShow Answer

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Portfolio income treated as Subpart F income.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

Correct AnswerverifiedShow Answer

LocalCo merges into HeirCo, a non-U.S. entity, in a transaction that would qualify as a "Type A" reorganization. The resulting realized gain is tax-deferred under U.S. income tax law using §§ 351 and 368.

Correct AnswerverifiedShow Answer

Generally, accrued foreign income taxes are translated at the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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An advance pricing agreement APA) is used between:

Correct AnswerverifiedShow Answer

Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000. Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $94,500 before FTC. Waltz's FTC is $50,000.

Correct AnswerverifiedShow Answer

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

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Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation.

Correct AnswerverifiedShow Answer

In allocating interest expense between U.S. and foreign sources, a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.

Correct AnswerverifiedShow Answer

A domestic corporation is one whose assets are primarily located in the United States. For this purpose, the primarily located test greater than 50%) applies.

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Your client holds foreign tax credit FTC) carryforwards i.e., it is in an "excess credit" position.) Give at least three planning ideas that the client should implement to free up the suspended FTCs.

Correct Answerverified∙ Generate "same basket" foreign-source ...View AnswerShow Answer

Which of the following statements regarding a non-U.S. person's U.S. tax consequences is true?

Correct AnswerverifiedShow Answer

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∙ Generate "same basket" foreign-source ...
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