Question 1

Match the definition with the correct term.
-An individual who gives up U.S. citizenship to avoid U.S. income taxes.

Accepted Answer

An individual who gives up U.S. citizenship to avoid U.S. income taxes is called an expatriate.

Answer: C 
 Nonresident alien is a term used to describe a foreign individual who is not a resident of the United States for tax purposes.

Answer: D 
 U.S. trade or business is a term used to describe a business or trade that is conducted within the United States.

Answer: E 
 Branch profits tax is a tax that is imposed on the branch profits of foreign corporations that are doing business within the United States.

Answer: F 
 Effectively connected income is a term used to describe income that is earned by a foreign person or entity as a result of their business or trade being conducted within the United States.

Question 2

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-A CFC's profits from sales of goods and services.

Accepted Answer

Foreign base company income refers to a CFC's profits from sales of goods and services.

Answer: C
 Controlled foreign corporation refers to a foreign corporation that is controlled by US shareholders who own more than 50% of the corporation's stock.

Answer: D
 US shareholder refers to a US person who owns 10% or more of the voting power of a foreign corporation.

Answer: E
 Previously taxed income refers to the amount of a foreign corporation's earnings that has already been subject to US taxation.

There is no match for B, F, or H.

Question 3

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable
income?

Accepted Answer

The answer of In international corporate income taxation, what are...

Question 4

Match the definition with the correct term.
-A non­U.S. citizen who holds a "green card."

Accepted Answer

A resident is a person who is not a U.S. citizen but holds a "green card" (permanent resident status) and is therefore considered a U.S. tax resident.

Answer: C
 A nonresident alien is a person who is not a U.S. citizen, does not hold a "green card," and does not meet the substantial presence test to be considered a resident for tax purposes.

Answer: A
 An expatriate is a U.S. citizen or resident who gives up their citizenship or residency and moves abroad.

Answer: D
 U.S. trade or business refers to any business conducted within the United States, whether by a U.S. resident or nonresident alien.

Answer: E
 The branch profits tax is a tax on the earnings of a foreign corporation's U.S. branch or subsidiary, at a rate of 30%.

Answer: F
 Effectively connected income refers to income that is earned by a nonresident alien or foreign corporation from a U.S. trade or business, and is therefore subject to U.S. income tax.

Question 5

Match the definition with the correct term.
-Treasury powers over transfer pricing.

Accepted Answer

Section 482 refers to the Treasury powers over transfer pricing.

Question 6

Match the definition with the correct term.
-A business operation that accounts for profits and losses using its functional currency.

Accepted Answer

A qualified business unit (QBU) is a separate and clearly identified unit of a trade or business that maintains separate books and records, tracks its own assets and liabilities, and accounts for its profits and losses in its functional currency, which can be different from the currency of the owner or parent company.

Answer: G
 Section 482 is a provision of the Internal Revenue Code that allows the IRS to adjust the allocation of income, deductions, credits, or allowances between related parties to reflect the economic reality of the transaction, and to prevent tax evasion or avoidance through transfer pricing.

Answer: A
 Inbound refers to activities related to a foreign person or company doing business in the United States, such as importing goods, providing services to US customers, or investing in US assets.

Answer: E
 A tax haven is a country or jurisdiction that offers favorable tax treatment or low tax rates to individuals and companies that may not be residents or have economic activity in that country. This can be used to reduce or avoid taxes in their home country.

Answer: F
 An income tax treaty is an agreement between two or more countries that sets out the rules for how residents of one country are taxed on their income in the other country. The purpose is to prevent double taxation and promote trade and investment between the countries.

Answer: C
 Allocation and apportionment refer to the methods used to divide the income, deductions, and other items of a multinational enterprise (MNE) among the countries where it operates. This is necessary to reflect the economic activity and ensure that each country taxes only its fair share of the income.

Question 7

Match the definition with the correct term.
-Individual who is not a U.S. citizen or resident.

Accepted Answer

A nonresident alien is an individual who is not a citizen of the U.S. and who does not meet the substantial presence test for residency in the U.S.

Answer: A
 An expatriate is someone who renounces their citizenship or who is living and working outside of their home country.

Answer: C
 A nonresident alien is an individual who is not a citizen of the U.S. and who does not meet the substantial presence test for residency in the U.S.

Answer: D
 A U.S. trade or business is any activity that is conducted within the U.S. and that is regularly carried on.

Answer: E
 The branch profits tax is a tax on certain types of income earned by a foreign corporation that operates a U.S. branch.

Answer: F
 Effectively connected income is income earned by a foreign person that is connected to a trade or business in the U.S. and that is taxed as if it were earned by a U.S. person.

Question 8

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

Accepted Answer

U.S. trade or business refers to any business conducted within the United States that generates effectively connected income, which can be subject to taxation.

Answer: F
 Effectively connected income refers to income that is generated from a U.S. trade or business and is subject to taxation for nonresident aliens and foreign corporations.

Answer: E
 The branch profits tax is a tax imposed on certain income earned by a foreign corporation from its U.S. branch, including effectively connected income.

Answer: A
 An expatriate is an individual who is a citizen of one country but resides and works in another country.

Answer: B
 A resident is an individual who lives and works in a particular country and is subject to taxation on their worldwide income.

Answer: C
 A nonresident alien is an individual who is not a citizen of the United States and does not reside in the United States but may have income from U.S. sources that is subject to taxation.

Question 9

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

The answer of Match the definition with the correct term....

Question 10

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

Accepted Answer

Tax haven refers to a country with very low or no income tax.

Question 11

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

U.S. shareholder is the term that matches the definition of being the owner of shares counted in determining whether a foreign corporation is a controlled foreign corporation. None of the other terms match this definition.

Question 12

Match the definition with the correct term.
-U.S. taxpayers earning income outside the United States.

Accepted Answer

Outbound taxpayers are those who earn income outside the United States and are subject to U.S. taxation on that income.

Question 13

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

Accepted Answer

Allocation and apportionment is the method for sourcing income and deductions. It is used to determine the portion of income that can be taxed by a specific jurisdiction.

The other terms are:
A) Inbound - Refers to the activities of foreign entities doing business in the U.S.
B) Outbound - Refers to the activities of U.S. entities doing business outside the U.S.
D) Qualified Business Unit - A separate and distinct unit of a larger business that operates in a foreign country.
E) Tax Haven - A jurisdiction that offers low or no tax rates to foreign investors.
F) Income Tax Treaty - A bilateral agreement between two countries that sets out the rules for taxation of income earned by residents of one country in the other country.
G) Section 482 - Provision of the U.S. tax code that allows the IRS to adjust prices and allocations made between related parties to ensure that transactions are conducted on an arm's length basis.

Question 14

Match the definition with the correct term.
-Bilateral agreement between two countries related to tax issues.

Accepted Answer

An income tax treaty is a bilateral agreement between two countries related to tax issues.

Answer: E
 A tax haven is a country or region that offers low tax rates and other tax benefits to companies and individuals.

Answer: G
 Section 482 is a provision of the US tax code that allows the IRS to make adjustments to the income of related parties to prevent tax evasion.

The other options do not match the given definition. Inbound and outbound refer to the direction of investment, allocation and apportionment refer to the allocation of income and expenses among different jurisdictions, and a qualified business unit is a separate business entity within a larger company.

Question 15

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, so as to free up the suspended FTCs.

Accepted Answer

The answer of Your client holds foreign tax credit (FTC)...

Question 16

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

Accepted Answer

A controlled foreign corporation is a non-U.S. subsidiary in which more than 50% of the voting power is owned by U.S. shareholders. Its income may be taxed to the U.S. parent before repatriation.

Answer: A 
 Foreign base company income is a type of income earned by a controlled foreign corporation that is taxable to the U.S. parent company before it is repatriated.

Answer: B 
 Foreign personal holding company income is a type of income earned by a controlled foreign corporation, and includes passive income such as dividends, interest, and royalties.

Answer: D 
 A U.S. shareholder is an individual or entity that owns 10% or more of the voting power in a foreign corporation, including a controlled foreign corporation.

Answer: H 
 Ownership of more than 80% of a foreign corporation may result in consolidating the foreign subsidiary's financial statements with those of the U.S. parent.

Answer: E 
 Previously taxed income is income earned by a controlled foreign corporation that has already been subject to U.S. taxation in a prior year, and is therefore not taxed again when repatriated.

Answer: F 
 Ownership of more than 10% of a foreign corporation may trigger certain disclosure and reporting requirements for the U.S. shareholder, but it does not have a direct tax impact.

Question 17

The § 367 cross­border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g. §§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Accepted Answer

The answer of The § 367 cross­border transfer rules seem...

Question 18

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

Accepted Answer

The answer of Match the definition with the correct term....

Question 19

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

Accepted Answer

Inbound refers to foreign taxpayers earning income inside the United States.

Answer: B
 Outbound refers to US taxpayers earning income outside of the United States.

Answer: C
 Allocation and apportionment is the process of dividing a corporation's income between different states for tax purposes.

Answer: D
 Qualified business unit refers to a separate and distinct unit of a larger corporation that can be taxed separately.

Answer: E
 Tax haven refers to a country with very low or no income tax rates, often used by individuals or corporations to minimize their tax liabilities.

Answer: F
 Income tax treaty is an agreement between two countries that determines how taxes will be handled for individuals or corporations that earn income in both countries.

Answer: G
 Section 482 is a provision in the US tax code that allows the IRS to adjust the prices charged between related parties to ensure that they are fair and reasonable.

Question 20

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once.
-Upon repatriation to a CFC, it does not create dividend income.

Accepted Answer

Previously taxed income (PTI) refers to earnings of a Controlled Foreign Corporation (CFC) that have already been taxed to the U.S. shareholder under the Subpart F or Global Intangible Low-Taxed Income (GILTI) provisions. Upon repatriation, these earnings do not create dividend income because they have already been included in the gross income of the U.S. shareholder.

Quiz 25: Taxation of International Transactions

Match the definition with the correct term. -An individual who gives up U.S. citizenship to avoid U.S. income taxes.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

Match the definition with the correct term. -A nonU.S. citizen who holds a "green card."

Match the definition with the correct term. -Treasury powers over transfer pricing.

Match the definition with the correct term. -A business operation that accounts for profits and losses using its functional currency.

Match the definition with the correct term. -Individual who is not a U.S. citizen or resident.

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

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.

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

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.

Match the definition with the correct term. -U.S. taxpayers earning income outside the United States.

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

Match the definition with the correct term. -Bilateral agreement between two countries related to tax issues.

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, so as to free up the suspended FTCs.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

The § 367 crossborder transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g. §§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

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

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Upon repatriation to a CFC, it does not create dividend income.

Quiz 25: Taxation of International Transactions

Match the definition with the correct term. -An individual who gives up U.S. citizenship to avoid U.S. income taxes.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A CFC's profits from sales of goods and services.

In international corporate income taxation, what are the uses of the "sourcing rules" in computing Federal taxable income?

Match the definition with the correct term. -A non­U.S. citizen who holds a "green card."

Match the definition with the correct term. -Treasury powers over transfer pricing.

Match the definition with the correct term. -A business operation that accounts for profits and losses using its functional currency.

Match the definition with the correct term. -Individual who is not a U.S. citizen or resident.

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

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.

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

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.

Match the definition with the correct term. -U.S. taxpayers earning income outside the United States.

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

Match the definition with the correct term. -Bilateral agreement between two countries related to tax issues.

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, so as to free up the suspended FTCs.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -A non-U.S. subsidiary whose income may be taxed to the U.S. parent before repatriation.

The § 367 cross­border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g. §§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Ownership threshold for U.S. shareholders to be deemed a controlled foreign corporation.

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

Match the definition with the correct term. Not all of the terms have a match. A definition can be used more than once. -Upon repatriation to a CFC, it does not create dividend income.

Match the definition with the correct term. -A nonU.S. citizen who holds a "green card."

The § 367 crossborder transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g. §§ 351 and 368. What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.