991. CHAPTER 9â??TAXATION OF INTERNATIONAL TRANSACTIONS

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991. CHAPTER 9â??TAXATION OF INTERNATIONAL TRANSACTIONS

991. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #73Which of the following is a principle used in applying income sourcing underU.S. rules?
a.Location of economic activity.b. Country with lowest tax rate.c. Country with highest tax rate.d. Potential size of allowed foreign taxcredit.
992. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #74Which of the following statements regarding income sourcing is correct?
a.Everything else equal, larger foreign-source income increases the foreign taxcredit limitation for U.S. persons.b. Everything else equal, largerforeign-source income decreases the foreign tax credit limitation for U.S.persons.c. Everything else equal, changingforeign-source income has no impact on the foreign tax credit limitation forU.S. persons.d. Everything else equal, largerU.S.-source income increases the foreign tax credit limitation for U.S.persons.
993. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #75Which of the following statements regarding income sourcing is not correct?
a.U.S. persons benefit from earning low-tax foreign-source income.b. Foreign persons generally benefitfrom avoiding U.S.-source income classification.c. U.S. persons are not concerned withsource of income because all their income is subject to U.S. tax under aworldwide system.d. Foreign persons may be subject to taxon U.S.-source income without regard to their actual presence in the UnitedStates.
994. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #76ForCo, a foreign corporation, receives interest income of $50,000 from USCo, anunrelated domestic corporation. USCo has historically earned 79% of its grossincome from active foreign-source business income. What amount of ForCoâ€sinterest income is U.S.-source?
a.$0.b. $10,500.c. $39,500.d. $50,000.
995. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #77WorldCo, a foreign corporation not engaged in a U.S. trade or business,receives $50,000 in interest income from deposits with the foreign branch of aU.S. bank. The U.S. bank earns 78% of its income from foreign sources. How muchof WorldCoâ€s interest income is U.S. source?
a.$0.b. $11,000.c. $39,000.d. $50,000.
996. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #78GlobalCo, a foreign corporation not engaged in a U.S. trade or business,receives $80,000 in interest income from deposits with the foreign branch of aU.S. bank. The U.S. bank earns 24% of its income from foreign sources. How muchof GlobalCoâ€s interest income is U.S. source?
a.$0.b. $19,200.c. $60,800.d. $80,000.
997. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #79Which of the following statements concerning the sourcing of income frominventory produced by the taxpayer in the U.S. and sold outside the U.S. istrue?
a.If title passes on the inventory outside the U.S., all of the inventory incomeis foreign source.b. Because the inventory is manufacturedin the U.S., all of the inventory income is U.S. source.c. The taxpayer may use the 50-50 methodto source one-half the income based on title passage and one-half the incomebased on location of production assets.d. The taxpayer may use the 50-50 methodto source one-half the income based on title passage and one-half the incomebased on where the sale negotiation takes place.
998. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #80AirCo, a domestic corporation, purchases inventory for resale from unrelateddistributors within the United Statesand resells this inventory to customers outside the United States with titlepassing outside the United States. What is the source of AirCoâ€s inventorysales income?
a.50% U.S. source and 50% foreign source.b. 100% U.S. source.c. 100% foreign source.d. 50% foreign source and 50% sourcedbased on location of manufacturing assets.
999. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #81WaterCo, a domestic corporation, purchases inventory for resale from unrelateddistributors outside the UnitedStates and resells this inventory to customers inside the United States withtitle passing inside the United States. What is the source of WaterCoâ€sinventory sales income?
a.50% U.S. source and 50% foreign source.b. 100% U.S. source.c. 100% foreign source.d. 50% foreign source and 50% sourcedbased on location of manufacturing assets.
1000. CHAPTER9—TAXATION OF INTERNATIONAL TRANSACTIONS Question MC #82RainCo, a domestic corporation, owns a number of patents related to designingumbrellas. RainCo licenses these patents to unrelated parties. TexCo, adomestic corporation, paid RainCo $100,000 in royalties related to theselicenses. TexCo uses the patent information in its manufacturing process in itsCanadian plant. IrishCo, an Irish corporation, paid RainCo $25,000 in royaltiesrelated to the licenses. IrishCo uses the patent information in itsmanufacturing process in its Michigan manufacturing plant. How muchforeign-source royalty income did RainCo earn from these licenses?
a.$0.b. $25,000.c. $100,000.d. $125,000.

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