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Exam 25: Taxation of International Transactions

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Question 41

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Yvonne is a citizen of France and does not have permanent resident status in the United States. During the last three years she has spent a number of days in the United States. Current year - 150 days First prior year - 150 days Second prior year - 90 days Is Yvonne treated as a U.S. resident for the current year?

A) No, because Yvonne is a citizen of France.
B) No, because Yvonne was not present in the United States at least 183 days during the current year.
C) No, because although Yvonne was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years.
D) Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years (using the appropriate fractions for the prior years) .

E) B) and D)
F) B) and C)

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Question 42

Multiple Choice

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Without the foreign tax credit, double taxation would result when:

A) The United States taxes the U.S.-source income of a U.S. resident.
B) A foreign country taxes the foreign-source income of a nonresident alien.
C) The United States and a foreign country both tax the foreign-source income of a U.S. resident.
D) Terms of a tax treaty assign income taxing rights to the U.S.

E) A) and D)
F) B) and C)

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Question 43

Multiple Choice

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

A deferral of Federal corporate income taxes by a multinational taxpayer is possible by using:

The transfer of the assets of a U.S. corporation's foreign branch to a newly formed foreign corporation is always tax deferred under § 351.

AirCo, a domestic corporation, purchases inventory for resale from unrelated distributors within the United States and resells this inventory to customers outside the United States, with title passing outside the United States. What is the sourcing of AirCo's inventory sales income?

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. a. Foreign base company income b. Foreign personal holding company income c. Controlled foreign corporation d. U.S. shareholder e. Previously taxed income f. More than 10 percent g. More than 50 percent h. More than 80 percent -Portfolio income treated as Subpart F income.

An advance pricing agreement (APA) is used between:

Goolsbee, Inc., a U.S. corporation, generates U.S.-source and foreign-source gross income. Goolsbee's assets (tax basis) are as follows. Goolsbee incurs interest expense of $200,000. Apportion interest expense to foreign-source income.

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

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?

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

In working with the foreign tax credit, a U.S. corporation may be able to alleviate the problem of excess foreign taxes by:

Dark, Inc., a U.S. corporation, operates Dunkel, an unincorporated branch manufacturing operation in Germany. Dark reports $100,000 of taxable income from Dunkel on its U.S. tax return, along with $400,000 of taxable income from its U.S. operations. Dark paid $30,000 in German income taxes related to the $100,000 of Dunkel income. Assuming a U.S. tax rate of 21%, what is Dark's U.S. tax liability after any allowable foreign tax credits?

Match the definition with the correct term. a. Inbound b. Outbound c. Allocation and apportionment d. Qualified business unit e. Tax haven f. Income tax treaty g. Section 482 -Method for sourcing income and deductions.

A tax haven often is:

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

Section 482 is used by the Treasury to:

Jokerz, a CFC of a U.S. parent, generated $80,000 Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.

Match the definition with the correct term. a. Expatriate b. Resident c. Nonresident alien d. U.S. trade or business e. Branch profits tax f. Effectively connected income -Individual who is not a U.S. citizen or resident.