Question 1

RainCo, a U.S. 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 U.S.-source royalty income did RainCo earn from these licenses?

Accepted Answer

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

Question 2

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 tax at capital gains rates under FIRPTA.

Accepted Answer

A) True 
 B)False

Question 3

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) A) and B)
F) A) and C)

Question 4

OutCo, a controlled foreign corporation in Meena (located outside the United States) , earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the dividend payors are located in Meena. OutCo's Subpart F income for the year is:

Accepted Answer

A)   $0.
B)   $0 only if OutCo is engaged in a trade or business in Meena.
C)   $600,000.
D)   $600,000 only if OutCo is engaged in a trade or business in Meena.E) A) and D)
F) B) and C)

Question 5

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under
§ 367.

Accepted Answer

A) True 
 B)False

Question 6

Match the definition with the correct term.
-Foreign taxpayers earning income inside the United States.

Accepted Answer

A)  Inbound
B)  Outbound
C)  Allocation and apportionment
D)  Qualified business unit
E)  Tax havenF) Income tax treaty G)  Section 482H) E) and G)
I) A) and D) A

Question 7

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were
$25,000. Jaime's total U.S. tax liability is $840,000 (the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Accepted Answer

A) True 
 B)False  False

Question 8

Subpart F income includes portfolio income such as dividends and interest.

Accepted Answer

A) True 
 B)False

Question 9

Kunst, a U.S. corporation, generates $100,000 of foreign-source income in the general income basket and $40,000 of foreign-source income in the passive income basket. Kunst's worldwide taxable income is $1,200,000, and its U.S. tax liability before FTC is $240,000. Foreign taxes attributable to the general income basket are $60,000 and to the passive income are $4,000. What is Kunst's foreign tax credit for the tax year?

Accepted Answer

A)   $64,000
B)   $24,000
C)   $20,000
D)   $4,000E) B) and D)
F) B) and C) B

Question 10

Match the definition with the correct term.
-A country with very low or no income tax.

Accepted Answer

A)  Inbound
B)  Outbound
C)  Allocation and apportionment
D)  Qualified business unit
E)  Tax havenF) Income tax treaty G)  Section 482H) C) and F)
I) C) and E)

Question 11

The following persons own Schlecht Corporation, a non-U.S.entity.   Jim, U.S. individual 35% Gina, U.S. individual 15% Marina, U.S. individual 8% Pedro, U.S. individual 12% Chee, non-U.S. individual 30%\begin{array}{lr}	ext { Jim, U.S. individual } & 35 \% \	ext { Gina, U.S. individual } & 15 \% \	ext { Marina, U.S. individual } & 8 \% \	ext { Pedro, U.S. individual } & 12 \% \	ext { Chee, non-U.S. individual } & 30 \%\end{array} Jim, U.S. individual  Gina, U.S. individual  Marina, U.S. individual  Pedro, U.S. individual  Chee, non-U.S. individual ​35%15%8%12%30%​  None of the shareholders are related. Subpart F income for the tax year is $300,000. No distributions are made. Which of the following statements is correct?

Accepted Answer

A)   Schlecht is not a CFC.
B)   Chee includes $90,000 in gross income.
C)   Marina is not a U.S. shareholder for purposes of determining whether Schlecht is a CFC.
D)   Marina includes $24,000 in gross income. E) None of the above
F) B) and C)

Question 12

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 13

Which of the following statements is false in regard to the U.S. income tax treaty program?

Accepted Answer

A)   There are about 70 bilateral income tax treaties between the United States and other countries.
B)   Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income.
C)   U.S. income tax treaties are written to set up a "network" of up to five foreign countries that are covered by the treaty language.
D)   None of these statements is false.E) A) and B)
F) A) and C)

Question 14

Given the following information, determine whether FanCo, a foreign corporation, is a CFC.
Shareholders of Voting
Foreign Corporation Power Classification Murray 24% U.S. person Nancy 20% U.S. person Otto 40% Foreign person Patricia 16% U.S. person
Patricia is Murray's daughter.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Murray, Nancy, and Patricia are U.S. sh...

Question 15

Which of the following situations requires the filing of an information return with the U.S. government?

Accepted Answer

A)   A domestic corporation that is 25% or more foreign owned.
B)   A foreign corporation carrying on a trade or business in the United States.
C)   U.S. persons who acquire or dispose of an interest in a foreign partnership.
D)   All of these.
E)   None of these.F) A) and B)
G) A) and C)

Question 16

Describe and diagram the timeline that most businesses use to enter the international markets.

Accepted Answer

Most businesses ente...

Question 17

Match the definition with the correct term.
-Activity that creates the potential for effectively connected income.

Accepted Answer

A)  Expatriate
B)  Resident
C)  Nonresident alien
D)  U.S. trade or business
E)  Effectively connected incomeF) A) and C)
G) C) and E)

Question 18

Which of the following statements regarding income sourcing is correct?

Accepted Answer

A)   Everything else being equal, a larger foreign-source income decreases the foreign tax credit limitation for U.S. persons.
B)   Everything else being equal, a larger foreign-source income increases the foreign tax credit limitation for U.S. persons.
C)   Everything else being equal, a larger U.S.-source income increases the foreign tax credit limitation for U.S. persons.
D)   Everything else being equal, changing foreign-source income does not change the foreign tax credit limitation for U.S. persons.E) A) and B)
F) None of the above

Question 19

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) None of the above
F) A) and B)

Question 20

PlantCo is a company based in Adagio. PlantCo uses a formula to manufacture pharmaceuticals. The formula was developed and is owned by DrugCo, a U.S. entity. Royalties paid by PlantCo to DrugCo for the use of the formula are U.S.-source income.

Accepted Answer

A) True 
 B)False

Exam 25: Taxation of International Transactions

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 tax at capital gains rates under FIRPTA.

Correct 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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OutCo, a controlled foreign corporation in Meena (located outside the United States) , earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the dividend payors are located in Meena. OutCo's Subpart F income for the year is:

Correct Answer
verified

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

Correct Answer
verified

Match the definition with the correct term. -Foreign taxpayers earning income inside the United States.

Correct Answer
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A

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $840,000 (the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Correct Answer
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False

Subpart F income includes portfolio income such as dividends and interest.

Correct Answer
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Correct Answer
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B

Match the definition with the correct term. -A country with very low or no income tax.

Correct Answer
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Correct Answer
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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 Answer
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Which of the following statements is false in regard to the U.S. income tax treaty program?

Correct Answer
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Given the following information, determine whether FanCo, a foreign corporation, is a CFC. Shareholders of Voting Foreign Corporation Power Classification Murray 24% U.S. person Nancy 20% U.S. person Otto 40% Foreign person Patricia 16% U.S. person Patricia is Murray's daughter.

Correct Answer
verified
Murray, Nancy, and Patricia are U.S. sh...
View Answer

Which of the following situations requires the filing of an information return with the U.S. government?

Correct Answer
verified

Describe and diagram the timeline that most businesses use to enter the international markets.

Correct Answer
verified
Most businesses ente...
View Answer

Match the definition with the correct term. -Activity that creates the potential for effectively connected income.

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

Correct Answer
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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:

Correct Answer
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PlantCo is a company based in Adagio. PlantCo uses a formula to manufacture pharmaceuticals. The formula was developed and is owned by DrugCo, a U.S. entity. Royalties paid by PlantCo to DrugCo for the use of the formula are U.S.-source income.

Correct Answer
verified

Exam 25: Taxation of International Transactions

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 tax at capital gains rates under FIRPTA.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

OutCo, a controlled foreign corporation in Meena (located outside the United States) , earns $600,000 in net interest and dividend income from investments in the bonds and stock of unrelated companies. All of the dividend payors are located in Meena. OutCo's Subpart F income for the year is:

Correct AnswerverifiedShow Answer

Inbound and offshore asset transfers by a U.S. business can be subject to immediate Federal income taxation under § 367.

Correct AnswerverifiedShow Answer

Match the definition with the correct term. -Foreign taxpayers earning income inside the United States.

Correct AnswerverifiedA

Jaime received gross foreign-source dividend income of $250,000. Foreign taxes withheld on the dividend were $25,000. Jaime's total U.S. tax liability is $840,000 (the 21% tax rate applies). Jaime's current-year FTC is $52,500.

Correct AnswerverifiedFalse

Subpart F income includes portfolio income such as dividends and interest.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

Match the definition with the correct term. -A country with very low or no income tax.

Correct AnswerverifiedShow Answer

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

Which of the following statements is false in regard to the U.S. income tax treaty program?

Correct AnswerverifiedShow Answer

Given the following information, determine whether FanCo, a foreign corporation, is a CFC. Shareholders of Voting Foreign Corporation Power Classification Murray 24% U.S. person Nancy 20% U.S. person Otto 40% Foreign person Patricia 16% U.S. person Patricia is Murray's daughter.

Correct Answerverified Murray, Nancy, and Patricia are U.S. sh...View AnswerShow Answer

Which of the following situations requires the filing of an information return with the U.S. government?

Correct AnswerverifiedShow Answer

Describe and diagram the timeline that most businesses use to enter the international markets.

Correct AnswerverifiedMost businesses ente...View AnswerShow Answer

Match the definition with the correct term. -Activity that creates the potential for effectively connected income.

Correct AnswerverifiedShow Answer

Which of the following statements regarding income sourcing is correct?

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:

Correct AnswerverifiedShow Answer

PlantCo is a company based in Adagio. PlantCo uses a formula to manufacture pharmaceuticals. The formula was developed and is owned by DrugCo, a U.S. entity. Royalties paid by PlantCo to DrugCo for the use of the formula are U.S.-source income.

Correct AnswerverifiedShow Answer

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A

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False

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B

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Murray, Nancy, and Patricia are U.S. sh...
View Answer

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Most businesses ente...
View Answer

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