CHAPTER 25 TAXATION OF INTERNATIONAL TRANSACTIONS

1. Which of the following statements regarding the U.S. taxation of non-U.S. persons is true?

a. Non-U.S. persons never are subject to U.S. income tax.

b. Non-U.S. persons are subject to U.S. income tax only on gains from U.S. real property.

c. Non-U.S. persons are subject to a withholding tax on U.S.-source portfolio income.

d. Non-U.S. persons are subject to a withholding tax on foreign-source portfolio income.

2. Which of the following statements regarding the U.S. taxation of non-U.S. persons is true?

a. A non­U.S. person’s effectively connected U.S. business income is taxed by the U.S. only if it is portfolio income.

b. A non­U.S. person’s effectively connected U.S. business income is subject to U.S. income taxation.

c. A non-U.S. person may earn income from selling U.S. real property without incurring any U.S. income tax.

d. A non-U.S. person must spend at least 183 days in the United States before any effectively connected income is subject to U.S. taxation.

3. Which of the following is a special tax regime imposed on certain foreign persons engaged in a U.S. trade or business?

a. Nondiscrimination tax.

b. Windfall U.S. profits tax.

c. Dividend repatriation tax.

d. Branch profits tax.

4. Which of the following statements regarding a non­U.S. person’s U.S. tax consequences is true?

a. Non-U.S. persons may be subject to withholding tax on U.S.-source investment income even if not engaged in a U.S. trade or business.

b. Non-U.S. persons are subject to U.S. income or withholding tax only if they are engaged in a U.S. trade or business.

c. Non-U.S. persons are not taxed on gains from U.S. real property as long as such property is not used in a U.S. trade or business.

d. Once a non­U.S. person is engaged in a U.S. trade or business, the non­U.S. person’s worldwide income is subject to U.S. taxation.

5. Which of the following statements regarding a non­U.S. person’s U.S. tax consequences is true?

a. Non-U.S. persons are potentially subject to U.S. withholding tax on U.S.-source investment income.

b. Non-U.S. individuals may be subject to U.S. income tax but non-U.S. corporations are never subject to U.S. income tax.

c. Non-U.S. persons are only subject to U.S. income or withholding tax if engaged in a U.S. trade or business.

d. Non-U.S. persons must be physically presentin the United States before any U.S.-source income is subject to U.S. income or withholding tax.

6. Which of the following is nota U.S. person?

a. Domestic corporation.

b. Citizen of Turkey with U.S. permanent residence status (i.e., green card).

c. U.S. corporation 100% owned by a foreign corporation.

d. Foreign corporation 100% owned by a domestic corporation.

7. Which of the following is nota foreign person?

a. Foreign corporation 51% owned by U.S. shareholders.

b. Foreign corporation 100% owned by a domestic corporation.

c. Citizen of Germany with U.S. permanent resident status (i.e., green card).

d. Citizen of Italy who spends 14 days vacationing in the United States.

8. Yvonne is a citizen of France and does not have permanent resident status in the United States. During the last three years she has spent a number of days in the United States.

Current year – 150 days First prior year – 150 days Second prior year – 90 days

Is Yvonne treated as a U.S. resident for the current year?

a. No, because Yvonne is a citizen of France.

b. No, because Yvonne was not present in the United States at least 183 days during the current year.

c. No, because although Yvonne was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years.

d. Yes, because Yvonne was present in the United States at least 31 days during the current year and 215 days during the current and prior two years (using the appropriate fractions for the prior years).

9. Magdala is a citizen of Italy and does not have permanent resident status in the United States. During the last three years she has spent a number of days in the United States.

Current year – 120 days First prior year – 150 days

Second prior year – 150 days

Is Magdala treated as a U.S. resident for the current year?

a. Yes, because Magdala was present in the United States at least 31 days during the current year and 195 days during the current and prior two years (using the appropriate fractions for the prior years).

b. No, because Magdala is a citizen of Italy.

c. No, because Magdala was not present in the United States at least 183 days during the current year.

d. No, because although Magdala was present in the United States at least 31 days during the current year, she was not present at least 183 days in a single year during the current or prior two years.

10. Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?

a. U.S. persons with only U.S. activities.

b. U.S. persons that earn only tax-exempt income.

c. U.S. persons with U.S. and non-U.S. activities.

d. Non-U.S. persons with only non-U.S. activities.

11. Which of the following persons typically is notconcerned with the U.S.-sourcing rules for gross income?

a. Foreign persons with U.S. activities.

b. Foreign persons with only foreign activities.

c. U.S. employees working abroad.

d. U.S. persons with foreign activities.

12. Which of the following determinations requires knowing the amount of one’s foreign­source gross income?

a. Itemized deductions.

b. Foreign tax credit.

c. Calculation of a U.S. person’s total taxable income.

d. Calculation of a U.S. person’s deductible interest expense.