Question 1

"Outbound taxation" deals with the U.S. tax rules that apply to U.S. persons doingbusiness outside the United States.

Accepted Answer

"Outbound taxation" indeed deals with the U.S. tax rules that apply to U.S. persons doing business outside the United States.

Question 2

Philippe is a French citizen. During 2017 he spent 150 days in the United States onbusiness. Because Philippe does not spend 183 days in the United States in 2017, he will not under any circumstances be treated as a resident alien for U.S. tax purposes.

Accepted Answer

False

Question 3

Nexus involves the criteria used by a government to assert its right to tax a person ortransaction within or without its borders.

Accepted Answer

The statement accurately describes the concept of nexus.

Question 4

U.S. individuals and corporations are eligible for a deemed-paid credit on dividends received from foreign corporations.

Accepted Answer

The answer of U.S. individuals and corporations are eligible for...

Question 5

A non U.S. citizen with a green card will always be treated as a resident alien for U.S. tax purposes regardless of the number of days she spends in the United States during the current year.

Accepted Answer

This is true. A non-U.S. citizen with a green card is considered a resident alien for tax purposes as long as they meet the substantial presence test, meaning they have been present in the U.S. for at least 31 days in the current year and a total of 183 days over a three-year period that includes the current year and the two years immediately before it.

Question 6

Under most U.S. treaties, a resident of the other country must have a permanentestablishment in the United States before being subject to U.S. taxation on business profits earned within the United States.

Accepted Answer

This is generally true under most U.S. tax treaties, as they typically include a provision stating that a resident of the treaty country must have a permanent establishment in the United States in order for the U.S. to tax their business profits earned in the United States. However, the specifics of each treaty may vary and should be reviewed on a case-by-case basis.

Question 7

The gross profit from a sale of inventory manufactured in the United States and sold inSpain will always be treated as 100 percent U.S. source income.

Accepted Answer

The gross profit from a sale of inventory manufactured in the United States and sold in Spain will be treated as a combination of U.S. source income and foreign source income, depending on the location of the sale.

Question 8

Once a U.S. corporation chooses a method to allocate interest expense, either fair market value or tax book value, that election cannot be changed without the permission of the commissioner of the Internal Revenue Service.

Accepted Answer

Once a U.S. corporation chooses a method to allocate interest expense, either fair market value or tax book value, that election can be changed without the permission of the commissioner of the Internal Revenue Service. However, certain rules and requirements must be followed in making such a change.

Question 9

Deductible interest expense incurred by a U.S. corporation will always be treated as aU.S. source deduction.

Accepted Answer

Deductible interest expense incurred by a U.S. corporation may be treated as foreign source deduction if it is related to income from foreign sources.

Question 10

A hybrid entity established in Ireland is treated as a flow-through entity for U.S. tax purposes and a corporation for Irish tax purposes.

Accepted Answer

This is correct. A hybrid entity established in Ireland is treated as a flow-through entity for U.S. tax purposes and a corporation for Irish tax purposes.

Question 11

The United States generally taxes U.S. sourced fixed and determinable, annual orperiodic income (FDAP) earned by non-U.S. persons by applying a withholding tax to the gross amount of income.

Accepted Answer

This statement is true. FDAP income includes things like interest, dividends, rents, and royalties and is subject to withholding tax for non-U.S. persons.

Question 12

One of the tax advantages to using a corporation through which to earn income in Germany is deferral of U.S. taxation on active business income earned by the corporation until such income is remitted back to the United States.

Accepted Answer

This is true. The deferral of U.S. taxation on active business income earned by a foreign corporation is allowed under the U.S. international tax rules. However, there are various requirements and limitations to qualify for this deferral, and it's important to consult with a tax professional to ensure compliance.

Question 13

Marcel, a U.S. citizen, receives interest income from bonds issued by a Dutchcorporation. The interest income will be considered U.S. source income for U.S. tax purposes.

Accepted Answer

Interest income from bonds issued by a foreign corporation (in this case, a Dutch corporation) is generally considered foreign source income for U.S. tax purposes, not U.S. source income.

Question 14

Alex, a U.S. citizen, became a resident of Belgium in 2017. Alex will no longer besubject to U.S. taxation on income he earns in Belgium if such income is exempted from tax under the U.S. - Belgium treaty.

Accepted Answer

The answer of Alex, a U.S. citizen, became a resident...

Question 15

Cecilia, a Brazilian citizen and resident, spent 120 days working in the United States inthe current year and earned $50,000. Because she spent more than 90 days in the United States, Cecilia's income will be treated as U.S. source and subject to U.S. taxation. The United States does not have an income tax treaty with Brazil.

Accepted Answer

As Cecilia spent more than 90 days in the United States, her income will be treated as U.S. source and subject to U.S. taxation. Additionally, since the United States does not have an income tax treaty with Brazil, Cecilia will not be able to claim any treaty benefits to reduce her tax liability. Therefore, option A is correct.

Question 16

The foreign tax credit regime is the primary mechanism used by the United Statesgovernment to mitigate or eliminate the potential double taxation of income earned byU.S. persons outside the United States.

Accepted Answer

The statement is true as the foreign tax credit regime allows U.S. taxpayers to offset their U.S. tax liability by the amount of foreign income taxes paid on the same income earned abroad, thereby avoiding or reducing potential double taxation.

Question 17

Alhambra Corporation, a U.S. corporation, receives a dividend from its 100 percent owned Spanish subsidiary. For foreign tax credit purposes, the dividend will always be characterized as passive category income.

Accepted Answer

The answer of Alhambra Corporation, a U.S. corporation, receives a...

Question 18

The Canadian government imposes a withholding tax of 15 percent on a dividend paid by a Canadian corporation to a U.S. individual. The withholding tax will be creditable on the individual's U.S. tax return as an "in lieu of" tax.

Accepted Answer

The Canadian government does impose a withholding tax of 15 percent on dividends paid by Canadian corporations to U.S. individuals. This withholding tax is creditable on the individual's U.S. tax return as an "in lieu of" tax, meaning it can be used to offset the individual's U.S. tax liability on the same income.

Question 19

All taxes paid to a foreign government by a U.S. corporation are creditable on the corporation's U.S. tax return.

Accepted Answer

The answer of All taxes paid to a foreign government...

Question 20

Amy is a U.S. citizen. During the year she earned income from an investment in a Frenchcompany. Amy will be subject to U.S. taxation on her income under the principle of source-based taxation.

Accepted Answer

Amy will be subject to U.S. taxation on her worldwide income, including income from foreign sources, under the principle of worldwide taxation, not source-based taxation.

Quiz 24: The US Taxation of Multinational Transactions