Question 1

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

Accepted Answer

Nonresident aliens are subject to a flat 30% tax rate on their U.S. source income, unless a lower rate applies under a tax treaty. The domestic corporation must withhold the 30% tax from the dividend payment. The tax is applied on net income, not gross income. However, nonresident aliens are not required to make estimated tax payments on their U.S. source income, including dividend income.

Question 2

Income is "effectively connected" with the conduct of a U.S. business only if

Accepted Answer

The answer of Income is "effectively connected" with the conduct...

Question 3

U.S. citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign- earned income exclusion for 60 days in 2016; 365 days in 2017; and 60 days in 2018. The maximum earned income exclusion for 2018 rounded to the nearest whole number is?

Accepted Answer

To calculate the maximum earned income exclusion for 2018, we need to add up the number of days that the individual qualifies for the foreign-earned income exclusion in 2018 and divide it by 365. In this case, the individual qualifies for the exclusion for 60 days in 2018, so the calculation would be:

60/365 = 0.1644

Then, we need to multiply this fraction by the maximum exclusion amount for 2018, which is $104,100. This gives us:

0.1644 x $104,100 = $17,113.64

Rounding this to the nearest whole number gives us the answer of $17,113, which corresponds to choice C).

Question 4

Jose, a U.S. citizen, has taxable income from U.S. sources of $15,000 and taxable income from a foreign country of $35,000. Assume the U.S. tax rate is 25% and Jose paid $12,000 in taxes to the foreign country. What foreign tax credit can be claimed by Jose?

Accepted Answer

The answer of Jose, a U.S. citizen, has taxable income...

Question 5

Karen, a U.S. citizen, earns $40,000 of taxable income from U.S. sources, $20,000 in taxable wages from Country A and $20,000 in taxable interest from Country B. The U.S. tax rate is 25%. The tax on Country A income is $8,000, and Country B charges no tax on the interest income. Assuming only a single basket is required, Karen's foreign tax credit that can be claimed is

Accepted Answer

The foreign tax credit is limited to the amount of U.S. tax that would be paid on the same income. Therefore, the maximum foreign tax credit that Karen can claim is the amount of foreign tax she paid on her wages earned from Country A, which is $8,000. She does not have any tax liability on her interest income from Country B, so she cannot claim a foreign tax credit for that income.

Question 6

Identify which of the following statements is true.

Accepted Answer

Nonresident aliens are taxed on U.S. source income, and capital gains are taxed if they are present in the U.S. for 183 days or more.

Question 7

U.S. citizen Patrick is a bona fide resident of a foreign country for all of the current year. Patrick uses a calendar year as his tax year. He has $100,000 of self- employment income and incurs $20,000 in housing expenses. The base housing cost amount is $16,624. The deduction for housing expenses is

Accepted Answer

The deduction for housing expenses is calculated as the excess of actual housing expenses over the base housing amount. Patrick's housing expenses are $20,000, and the base amount is $16,624. The excess is $3,376 ($20,000 - $16,624), which is deductible for AGI.

Question 8

A U.S. citizen, who uses a calendar year as his tax year, is transferred to a foreign country by his employer. The U.S. citizen arrived in the foreign country on November 3 of last year. Residency is expected to be maintained in the foreign country until August 4 of next year. None of the years are a leap year. The first year for which an earned income exclusion can be claimed is

Accepted Answer

The answer of A U.S. citizen, who uses a calendar...

Question 9

Perry, a U.S. citizen, is transferred by his employer to Japan for a three- year assignment. Which one of the following items is not excluded under Sec. 911?

Accepted Answer

Premiums paid on first $50,000 of group term life insurance are not excluded under Sec. 911. All other options - base salary, cost-of-living allowance, and housing costs - can be excluded under Sec. 911 if certain criteria are met.

Question 10

Marcella, an alien individual, is present in the United States for 122 days this year and 122 days each in the past two years. Does she satisfy both the 31- day and 183- day requirements for U.S. Residency status?

Accepted Answer

The answer of Marcella, an alien individual, is present in...

Question 11

The physical presence test method of qualifying for the foreign- earned income exclusion requires the

Accepted Answer

The physical presence test method of qualifying for the foreign-earned income exclusion requires the presence in one or more foreign countries for at least 330 full days during a 12-month period. It does not have to be consecutive days, but the total must add up to at least 330.

Question 12

Darlene, a U.S. citizen, has foreign- earned income of $150,000 and incurs $33,750 of foreign- earned income taxes. How much of Darlene's foreign income taxes are noncreditable?

Accepted Answer

The answer of Darlene, a U.S. citizen, has foreign- earned...

Question 13

Identify which of the following statements is false.

Accepted Answer

The bona fide resident test requires an individual to be a resident of a foreign country for an entire tax year, not just 330 days. The 330-day requirement is part of the physical presence test, not the bona fide resident test.

Question 14

Identify which of the following statements is true.

Accepted Answer

The foreign-earned income exclusion is only available for days on which the taxpayer is both a bona fide resident of a foreign country and physically present in that country. Fringe benefits that are excluded from gross income under Code Section 911 do not reduce the annual dollar ceiling for the foreign income exclusion. An individual who is physically present in a foreign country for 330 full days out of a 12-month period can claim the foreign-earned income exclusion for all days in the 12-month period.

Question 15

Nonresident aliens are not allowed to claim the standard deduction.

Accepted Answer

Nonresident aliens are not eligible for the standard deduction, but they may be able to claim certain itemized deductions.

Question 16

Identify which of the following statements is false.

Accepted Answer

The bona fide foreign resident test is different from the physical presence test. The physical presence test requires being in a foreign country for 330 full days, not the bona fide resident test.

Question 17

Identify which of the following statements is true.

Accepted Answer

Resident aliens are taxed on their worldwide income at the same rates as U.S. citizens.

Question 18

In January of the current year, Stan Signowski's U.S. employer assigned him to their Paris office. This year, he earned salary, a cost- of- living allowance, a housing allowance, a home leave allowance that permits him to return home once each year, and an education allowance to pay for U.S. schooling for his son. Stan and his wife, Jennifer, have rented an apartment in Paris and paid French income taxes. What tax issues does Stan need to consider when preparing his tax return?

Accepted Answer

The answer of In January of the current year, Stan...

Question 19

Pedro, a nonresident alien, licenses a patent to a U.S. company for an $11 per unit fee for each unit produced. As a result of receiving the fee, Pedro must recognize the fee as

Accepted Answer

As a nonresident alien, Pedro's licensing fee income from the U.S. company is considered effectively connected income and subject to U.S. taxation at ordinary income tax rates. Therefore, Pedro must recognize the fee as ordinary income taxable in the United States.

Question 20

U.S. citizen Barry is a bona fide resident of a foreign country for all of 2018. Barry uses a calendar year as his tax year and receives $158,000 in salary and allowances from his employer. Included in the $158,000 is a $25,000 housing allowance. Barry's housing costs are $30,000. The base housing amount for the current year is $16,624. What amount related to his housing can Barry exclude on his Form 2555?

Accepted Answer

Barry can exclude the excess of his housing costs over the base housing amount. His housing costs are $30,000, and the base housing amount is $16,624. Therefore, the excludable amount is $30,000 - $16,624 = $13,376.

Quiz 16: U.S. Taxation of Foreign-Related Transactions

A nonresident alien earns $10,000 of dividends from a domestic corporation, which is the alien's only U.S. source income. Which one of the following statements is incorrect?

Income is "effectively connected" with the conduct of a U.S. business only if

U.S. citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign- earned income exclusion for 60 days in 2016; 365 days in 2017; and 60 days in 2018. The maximum earned income exclusion for 2018 rounded to the nearest whole number is?

Jose, a U.S. citizen, has taxable income from U.S. sources of $15,000 and taxable income from a foreign country of $35,000. Assume the U.S. tax rate is 25% and Jose paid $12,000 in taxes to the foreign country. What foreign tax credit can be claimed by Jose?

Identify which of the following statements is true.

Perry, a U.S. citizen, is transferred by his employer to Japan for a three- year assignment. Which one of the following items is not excluded under Sec. 911?

Marcella, an alien individual, is present in the United States for 122 days this year and 122 days each in the past two years. Does she satisfy both the 31- day and 183- day requirements for U.S. Residency status?

The physical presence test method of qualifying for the foreign- earned income exclusion requires the

Darlene, a U.S. citizen, has foreign- earned income of $150,000 and incurs $33,750 of foreign- earned income taxes. How much of Darlene's foreign income taxes are noncreditable?

Identify which of the following statements is false.

Identify which of the following statements is true.

Nonresident aliens are not allowed to claim the standard deduction.

Identify which of the following statements is false.

Identify which of the following statements is true.

Pedro, a nonresident alien, licenses a patent to a U.S. company for an $11 per unit fee for each unit produced. As a result of receiving the fee, Pedro must recognize the fee as