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Exam 9: Taxation of International Transactions

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Question 41

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Dividends received from Shamrock,Ltd.,an Irish corporation that earns 40% of its income from U.S.business activities,are foreign-source income.

A) True
B) False

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Question 42

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The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.

A) True
B) False

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Question 43

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Arendt,Inc.,a domestic corporation,purchases a piece of equipment for use in its manufacture of custom pianos.The equipment is acquired in Ireland at a cost of 200,000 euros when 1 euro: $1.25.Payment is due in 90 days.Arendt acquires 200,000 euros and pays for the machine when 1 euro: $1.15.What is the basis of the asset to Arendt and what is the foreign currency exchange gain or loss,if any?

An advance pricing agreement (APA) is an agreement:

Match the definition with the correct term. a.FDAP b.FIRPTA c.Effectively connected income d.U.S. trade or business e.Branch profits tax f.Nonresident alien -Tax rules governing U.S.taxation of foreign persons disposing of U.S.real property.

Which of the following is not a specific separate income category for purposes of the foreign tax credit limitation calculation after 2006?

Drake Corporation,a domestic corporation,conducts all of its transactions in the U.S.dollar.It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can.The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can.What is Drake's exchange gain or loss on this sale?

Match the definition with the correct term. a.Foreign base company income b.Foreign personal holding company income c.U.S. shareholder d.Previously taxed income e.De minimis rule f.Passive foreign investment company -Exception that allows a controlled foreign corporation to earn small amounts of Subpart F income.

The purpose of the transfer pricing rules is to ensure that taxpayers have ultimate flexibility in shifting profits between related entities.

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

Match the definition with the correct term. a.Indirect credit b.Direct credit c.10 percent d.50 percent e.Section 78 f.Two g. Six h. Overall foreign loss -Requirement that the amount of any deemed paid foreign tax credit be included in gross income.

Given the following information,determine if FanCo,a foreign corporation,is a CFC. Patricia is Murray's daughter.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -U.S.taxpayers earning income outside the United States.

There is no minimum ownership percentage required before application of the PFIC rules to a U.S.owner of a PFIC.

USCo,a domestic corporation,receives $100,000 of foreign-source income in the general limitation income category and $40,000 of foreign-source income in the passive income category.Worldwide taxable income is $1,200,000 and the U.S.tax liability before FTC is $420,000.Foreign taxes attributable to the general limitation income are $60,000 and to the passive income are $4,000.What is the total FTC allowed to U.S.corporation for the tax year?

The green card remains in effect until:

Sang,an NRA who was not a resident of a treaty country,receives taxable dividends of $80,000 from a domestic corporations.Sang does not have a U.S.trade or business.The dividends will be taxed by the United States through withholding by the payor of:

During 2008,Martina,an NRA,receives interest income of $50,000 from Collins,Inc.,an unrelated U.S.corporation.Considering the following facts related to Collins' operations,what is the source of the interest income received by Martina?

An appropriate transfer price is one that considers the risks,assets,and functions of the persons to whom income is assigned.

Match the definition with the correct term. a. Inbound b. Section 482 c. Tax haven d. Qualified business unit e. Outbound f. Income tax treaty g. Allocation and apportionment -Foreign taxpayers earning income inside the United States.