1. Which statement best describes the U.S. framework for determining if an individual who is not a U.S. citizen will be treated as a resident alien for U.S. tax purposes?
A person must have a green card and meet a substantial presence test to be treated as a resident alien for U.S. tax purposes.
A person must have a green card to be treated as a resident alien for U.S. tax purposes.
A person must meet a substantial presence test to be treated as a resident alien for U.S. tax purposes.
A person with a green card will always be treated as a resident alien for U.S. tax purposes, while a person without a green card may be treated as a resident alien if she meets a substantial presence test.
2. Which of the following statements best describes the substantial presence test as it applies to determining if a non U.S. citizen is a resident alien for U.S. tax purposes?
To be treated as a resident alien, an individual must be physically present in the United States for 183 days in the current year.
To be treated as a resident alien, an individual must be physically present in the United States for 183 days in the current year and each of the prior two years.
To be treated as a resident alien, an individual must be physically present in the United States for 183 days using a formula that includes the current year and the prior two years.
To be treated as a resident alien, an individual must be physically present in the United States for 183 days using a formula that includes the current year and the prior year.
3. Under which of the following scenarios could Charles, a citizen of England, be eligible to claim the "closer connection" exception to the substantial presence test in 2012?
Charles spent 183 days in the United States in 2012 and has his tax home in England.
Charles spent 183 days in the United States in 2012 and has his tax home in the United States.
Charles spent 182 days in the United States in 2012 and has his tax home in England.
Charles spent 182 days in the United States in 2012 and has his tax home in the United States.
Knoxville Corporation, a U.S. corporation, incurred $300,000 of research and experimental (R&E) expenses during 2012. Knoxville sells inventory within the United States and abroad. Knoxville conducted all of the research related to the inventory within the United States. Gross sales of the inventory was $10,000,000, of which $3,000,000 was from foreign source sales. Gross profit from sale of the inventory was $5,000,000, of which $2,000,000 was from foreign source sales.
4. What is the minimum amount of R&E expense that can be apportioned to the company's foreign source income for foreign tax credit purposes, assuming this is the first year the company makes this computation?
$120,000
$90,000
$45,000
$0
5. Absent a treaty provision, what is the statutory withholding tax rate imposed by the United States on a dividend paid by a U.S. corporation to a resident of Denmark?
30%
15%
5%
0%
6. Under a U.S. treaty, what must a non-resident corporation create in the United States before it is subject to U.S. taxation on its business profits?
U.S. trade or business
Permanent establishment
The physical presence of at least one employee
The physical presence of an asset such as a warehouse
7. Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. Horton had post-1986 earnings and profits of C$2,400,000 and post-1986 foreign taxes of $1,600,000. During the current year, Horton paid a dividend of C$600,000 to Cruller. The dividend was characterized as general category income for FTC purposes. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. taxable income of $2,000,000. Cruller's U.S. tax rate is 34 percent. Compute the tax consequences to Cruller as a result of this dividend.
Taxable income of $3,000,000, a net U.S. tax of $590,000, and a FTC carryover of $0.
Taxable income of $3,000,000, a net U.S. tax of $680,000 and a FTC carryover of $90,000.
Taxable income of $2,600,000, a net U.S. tax of $680,000, and a FTC carryover of $226,000.
Taxable income of $2,600,000, a net U.S. tax of $454,000 and a FTC carryover of $0.
8. Windmill Corporation, a Dutch corporation, is owned by the following unrelated persons: 50 percent by a U.S. corporation, 5 percent by a U.S. individual, and 45 percent by a Swiss corporation. During the year, Windmill earned $2,000,000 of subpart F income.