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Question;965. Question;MC #47;Fulton, Ltd., a foreign corporation, operates a U.S. branch that reports;effectively connected U.S. earnings and profits (after income taxes) of;$600,000 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;a.;$100,000.;b. $500,000.;c. $600,000.;d. $1,100,000.;966. Question;MC #48;Jilt, a non-U.S. corporation, not resident in a treaty country, operates a U.S.;branch that earns effectively connected E & P of $4 million for the tax;year. The branch increases its investments in U.S. property (its U.S. net;equity) by $1,600,000. The branch pays a U.S. corporate income tax of;$2,153,846. Jilt?s branch profits tax is;a.;$720,000.;b. $1,200,000.;c. $2,153,846.;d. $2,873,846.;967. Question;MC #49;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;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.;968. Question;MC #50;Which of the following transactions, if entered into by an NRA, is not subject to U.S. taxation?;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.;969. Question;MC #51;ForCo, a foreign corporation not engaged in a U.S. trade or business;recognizes a $3 million gain from the sale of land located in the United;States. The amount realized on the sale was $50 million. Absent any exceptions;what is the required withholding amount on the part of the purchaser of this;land?;a.;$0.;b. $300,000.;c. $500,000.;d. $3 million.;e. $5 million.;970. Question;MC #52;Which of the following situations requires the filing of an information return;with the U.S. government?;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 the above.;e. None of the above.;971. Question;MC #53;A U.S. corporation may be able to alleviate the problem of excess foreign taxes;by;a.;Repatriating more foreign income to the United States in the year there is an;excess limitation.;b. Deducting the excess foreign taxes;that do not qualify for the credit.;c. Generating ?same basket?;foreign-source income that is subject to a tax rate lower than the U.S. tax;rate.;d. Generating ?same basket?;foreign-source income that is subject to a tax rate higher than the U.S. tax;rate.;972. Question;MC #54;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?;a.;$0.;b. $455,000.;c. $500,000.;d. $770,000.;e. Some other amount.;973. Question;MC #55;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 $40,000 in German income taxes related to the;$100,000 of Dunkel income. Assuming a U.S. tax rate of 35%, what is Dark?s U.S.;tax liability after any allowable foreign tax credits?;a.;$35,000.;b. $135,000.;c. $140,000.;d. $175,000.;974. Question;MC #56;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?;a.;$0.;b. $30,000.;c. $70,000.;d. $100,000.;975. Question;MC #57;Old, Inc., a U.S. corporation, earns foreign-source income classified in two;different limitation baskets in the current year. It earns $20,000 in passive;income and suffers a net loss of $45,000 in the general limitation basket. What;is the numerator of the FTC limitation formula for the passive basket in the;current year?;a.;($25,000).;b. $0.;c. $20,000.;d. $25,000.;976. Question;MC #58;Waldo, Inc., a U.S. corporation, owns 100% of Orion, Ltd., a foreign;corporation. Orion earns only general basket income. During the current year;Orion paid Waldo a $5,000 dividend. The foreign tax credit associated with this;dividend is $3,000. The foreign jurisdiction requires a withholding tax of 10%;so Waldo received only $4,500 in cash as a result of the dividend. What is;Waldo?s total U.S. gross income reported as a result of the $4,500 cash received?;a.;$8,000.;b. $5,000.;c. $4,500.;d. $3,000.;977. Question;MC #59;Performance, Inc., a U.S. corporation, owns 100% of Krumb, Ltd., a foreign;corporation. Krumb earns only general basket income. During the current year;Krumb paid Performance a $200,000 dividend. The foreign tax credit associated;with this dividend is $30,000. The foreign jurisdiction requires a withholding;tax of 30%, so Performance received only $140,000 in cash as a result of the;dividend. What is Performance?s total U.S. gross income reported as a result of;the $140,000 cash received?;a.;$30,000.;b. $140,000.;c. $200,000.;d. $230,000.;978. Question;MC #60;Which of the following statements regarding the U.S. taxation of foreign;persons is true?;a.;Foreign persons never are subject to U.S. income tax.;b. Foreign persons are subject to U.S.;income tax only on gains from U.S. real property.;c. Foreign persons are subject to a withholding;tax on foreign-source portfolio income.;d. Foreign persons are subject to a;withholding tax on U.S.-source portfolio income.;979. Question;MC #61;Which of the following statements regarding the U.S. taxation of foreign;persons is true?;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.;980. Question;MC #62;Which of the following is a special tax regime imposed on certain foreign;persons engaged in a U.S. trade or business?;a.;Nondiscrimination tax.;b. Windfall U.S. profits tax.;c. Dividend repatriation tax.;d. Branch profits tax.;981. Question;MC #63;Which of the following statements regarding a foreign person?s U.S. tax;consequences is true?;a.;Foreign persons are subject to U.S. income or withholding tax only if they are;engaged in a U.S.-trade or business.;b. Foreign persons may be subject to;withholding tax on U.S.-source investment income even if not engaged in a U.S.;trade or business.;c. Foreign 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 foreign person is engaged in a;U.S. trade or business, the foreign person?s worldwide income is subject to;U.S. taxation.;982. Question;MC #64;Which of the following statements regarding a foreign person?s U.S. tax;consequences is true?;a.;Foreign persons must be physically present in the United States before any;U.S.-source income is subject to U.S. income or withholding tax.;b. Foreign individuals may be subject to;U.S. income tax but foreign corporations are never subject to U.S. income tax.;c. Foreign persons are only subject to;U.S. income or withholding tax if engaged in a U.S. trade or business.;d. Foreign persons are potentially;subject to U.S. withholding tax on U.S.-source investment income.;983. Question;MC #65;Which of the following is not a U.S.;person?;a.;Domestic corporation.;b. Citizen of Turkey with U.S. permanent;residence status (i.e., green card).;c. U.S. corporation 100% owned by a;foreign corporation.;d. Foreign corporation 100% owned by a;domestic corporation.;984. Question;MC #66;Which of the following is not a;foreign person?;a.;Citizen of Germany with U.S. permanent resident status (i.e., green card).;b. Foreign corporation 100% owned by a;domestic corporation.;c. Foreign corporation 51% owned by U.S.;shareholders.;d. Citizen of Italy who spends 14 days;vacationing in the United States.;985. Question;MC #67;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).;986. Question;MC #68;Magdala is a citizen of Italy 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 ? 120 days;First prior year ? 150 days;Second prior year ? 150 days;Is Magdala treated as a U.S. resident for the current year?;a.;Yes, because Magdala was present in the United States at least 31 days during;the current year and 195 days during the current and prior two years (using the;appropriate fractions for the prior years).;b. No, because Magdala is a citizen of;Italy.;c. No, because Magdala was not present;in the United States at least 183 days during the current year.;d. No, because although Magdala 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.;987. Question;MC #69;Which of the following persons typically is concerned with the U.S.-sourcing;rules for gross income?;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.;988. Question;MC #70;Which of the following persons typically is not;concerned with the U.S.-sourcing rules for gross income?;a.;Foreign persons with U.S. activities.;b. U.S. persons with foreign activities.;c. U.S. employees working abroad.;d. Foreign persons with only foreign;activities.;989. Question;MC #71;Which of the following determinations requires knowing the amount of one?s;foreign-source gross income?;a.;Itemized deductions.;b. Foreign tax credit.;c. Calculation of a U.S. person?s total;taxable income.;d. Calculation of a U.S. person?s;deductible interest expense.;990. Question;MC #72;Which of the following determinations does not;require knowing the amounts of one?s U.S.- versus foreign-source income?;a.;Calculation of U.S. withholding tax on the FDAP income of foreign persons.;b. Calculation of a foreign person?s;income effectively connected with carrying on a U.S. trade or business.;c. Calculation of the foreign earned;income exclusion.;d. Calculation of a U.S. person?s total;taxable income.;991. Question;MC #73;Which of the following is a principle used in applying income sourcing under;U.S. rules?;a.;Location of economic activity.;b. Country with lowest tax rate.;c. Country with highest tax rate.;d. Potential size of allowed foreign tax;credit.;992. Question;MC #74;Which of the following statements regarding income sourcing is correct?;a.;Everything else equal, larger foreign-source income increases the foreign tax;credit limitation for U.S. persons.;b. Everything else equal, larger;foreign-source income decreases the foreign tax credit limitation for U.S.;persons.;c. Everything else equal, changing;foreign-source income has no impact on the foreign tax credit limitation for;U.S. persons.;d. Everything else equal, larger;U.S.-source income increases the foreign tax credit limitation for U.S.;persons.;993. Question;MC #75;Which of the following statements regarding income sourcing is not correct?;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.;994. Question;MC #76;ForCo, a foreign corporation, receives interest income of $50,000 from USCo, an;unrelated domestic corporation. USCo has historically earned 79% of its gross;income from active foreign-source business income. What amount of ForCo?s;interest income is U.S.-source?;a.;$0.;b. $10,500.;c. $39,500.;d. $50,000.;995. Question;MC #77;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?;a.;$0.;b. $11,000.;c. $39,000.;d. $50,000.;996. Question;MC #78;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?;a.;$0.;b. $19,200.;c. $60,800.;d. $80,000.;997. Question;MC #79;Which of the following statements concerning the sourcing of income from;inventory produced by the taxpayer in the U.S. and sold outside the U.S. is;true?;a.;If title passes on the inventory outside the U.S., all of the inventory income;is foreign source.;b. Because the inventory is manufactured;in the U.S., all of the inventory income is U.S. source.;c. The taxpayer may use the 50-50 method;to source one-half the income based on title passage and one-half the income;based on location of production assets.;d. The taxpayer may use the 50-50 method;to source one-half the income based on title passage and one-half the income;based on where the sale negotiation takes place.;998. Question;MC #80;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 source of AirCo?s inventory;sales income?;a.;50% U.S. source and 50% foreign source.;b. 100% U.S. source.;c. 100% foreign source.;d. 50% foreign source and 50% sourced;based on location of manufacturing assets.;999. Question;MC #81;WaterCo, a domestic corporation, purchases inventory for resale from unrelated;distributors outside the United;States and resells this inventory to customers inside the United States with;title passing inside the United States. What is the source of WaterCo?s;inventory sales income?;a.;50% U.S. source and 50% foreign source.;b. 100% U.S. source.;c. 100% foreign source.;d. 50% foreign source and 50% sourced;based on location of manufacturing assets.;1000. Question;MC #82;RainCo, a domestic 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;foreign-source royalty income did RainCo earn from these licenses?;a.;$0.;b. $25,000.;c. $100,000.;d. $125,000.;1001. Question;MC #83;SunCo, a domestic corporation, owns a number of patents related to designing;sunglasses. SunCo licenses these patents to unrelated parties. SpainCo, a;Spanish corporation, paid SunCo $78,000 in royalties related to these licenses.;SpainCo uses the patent information in its manufacturing process in its Texas;plant. WiscCo, a domestic corporation, paid SunCo $32,000 in royalties related;to the licenses. WiscCo uses the patent information in its manufacturing;process in its German manufacturing plant. How much foreign-source royalty;income did SunCo earn from these licenses?;a.;$0.;b. $32,000.;c. $78,000.;d. $110,000.;1002. Question;MC #84;Which of the following statements regarding the sourcing of dividend income is;true?;a.;Dividends are sourced based on the residence of the recipient.;b. Dividends from a U.S. corporation are;U.S. source, without regard to whether the U.S. corporation is an 80-20;company.;c. Dividends from a U.S. corporation are;foreign-source, if the U.S. corporation is an 80-20 company.;d. Dividends from a U.S. corporation are;foreign-source based on the percentage of foreign-source income earned by the;U.S. payor.;1003. Question;MC #85;Which of the following statements regarding the sourcing of dividend income is;true?;a.;Dividends from foreign corporations are always foreign source.;b. Dividends are sourced based on the;residence of the recipient.;c. Dividends from foreign corporations;are foreign-source only to the extent that 80% or more of the foreign;corporation?s gross income for the 3 years preceding the year of the dividend;payment was effectively connected with the conduct of a foreign trade or;business.;d. A percentage of dividends from;foreign corporations are U.S. source to the extent that 25% or more of the;foreign corporation?s gross income for the 3 years preceding the year of the;dividend payment was effectively connected with the conduct of a U.S. trade or;business.;1004. Question;MC #86;Which of the following statements regarding the sourcing of gross income is;true?;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.;1005. Question;MC #87;Which of the following statements regarding the sourcing of gross income is;true?;a.;All else equal, a U.S. corporation prefers that more of its U.S. taxable income;be characterized as foreign source, to increase its foreign tax credit limitation.;b. All else equal, a U.S. corporation;prefers that less of its U.S. taxable income be characterized as;foreign-source, to increase its foreign tax credit limitation.;c. All trade or business income earned;by a U.S. corporation is treated as U.S.-source income.;d. All investment income earned by a;U.S. corporation is treated as U.S.-source income.;1006. Question;MC #88;Which of the following income items does not;represent Subpart F income if earned by a CFC? Purchase of inventory from a;U.S. parent and sale to;a.;Anyone inside the CFC country.;b. Anyone outside the CFC country.;c. A related party outside the CFC;country.;d. A non-related party outside the CFC;country.;1007. Question;MC #89;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?;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.;1008. Question;MC #90;Which of the following statements best describes the primary purpose of the;Subpart F income provisions?;a.;The Subpart F income provisions provide certainty as to the U.S. income tax;treatment of cross-border transactions.;b. The Subpart F income provisions allow;deferral of foreign-source income from U.S. taxation.;c. The Subpart F income provisions;prevent shifting of income from the United States to low-tax foreign;jurisdictions.;d. The Subpart F income provisions;prevent shifting of income from the United States to high-tax foreign;jurisdictions.;1009. Question;MC #91;Which of the following items of CFC income constitute foreign base company;sales income?;a.;Sale of inventory property purchased from the CFC?s U.S. parent company and;sold to related parties within the CFC?s country of incorporation.;b. Sale of inventory property purchased;from the CFC?s U.S. parent company and sold to unrelated parties within the;CFC?s country of incorporation.;c. Sale of inventory property purchased;from the CFC?s U.S. parent company and sold to related parties outside the;CFC?s country of incorporation.;d. Sale of inventory property purchased;from unrelated parties and sold to related parties within the CFC?s country of;incorporation.;1010. Question;MC #92;USCo, a domestic corporation, receives $100,000 of foreign-source passive;income on which foreign taxes of $5,000 are withheld. Its worldwide taxable;income is $700,000 and its U.S. tax liability before the foreign tax credit is;$245,000. What is USCo?s allowed foreign tax credit?;a.;$35,000.;b. $30,000.;c. $5,000.;d. $95,000.;1011. Question;MC #93;USCo, a domestic corporation, receives $700,000 of foreign-source passive;income on which foreign taxes of $70,000 are withheld. Its worldwide taxable;income is $1,500,000 and its U.S. tax liability before the foreign tax credit;is $525,000. What is USCo?s allowed foreign tax credit?;a.;$245,000.;b. $70,000.;c. $175,000.;d. $770,000.;1012. Question;MC #94;Which of the following foreign taxes paid by a U.S. corporation is eligible for;the foreign tax credit?;a.;Real property taxes.;b. Value added taxes.;c. Dividend withholding taxes.;d. Sales taxes.;1013. Question;MC #95;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)?;a.;$10 million.;b. $16 million.;c. $187,500.;d. $487,500.;1014. Question;MC #96;USCo, a domestic corporation, has worldwide taxable income of $500,000;including a $100,000 dividend from ForCo, a wholly-owned foreign corporation.;ForCo?s post-1986 undistributed earnings and profits are $1 million and it has;paid $200,000 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)?;a.;$200,000.;b. $120,000.;c. $800,000.;d. $20,000.;1015. Question;MC #97;The purpose of the deemed paid foreign tax credit is;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.;1016. Question;MC #98;USCo has foreign-source income from a manufacturing operation, from sales of;the manufactured goods, and from stocks and bonds held for investment. How many;categories or ?baskets? of income does USCo have for foreign tax credit limitation;purposes?;a.;One.;b. Two.;c. Three.;d. Four.

 

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