Chapter 11 – International

Taxation
Multiple Choice Questions
1.
What is the optimal tax objective for multinational corporations?
a. minimize domestic taxes paid on worldwide income
b. minimize worldwide taxes paid, within the limitations of
applicable tax law
c. minimize worldwide taxes paid
d. minimize foreign taxes
2.
What is a tax holiday?
a. A trip made to tax havens to buy goods free of sales tax
b. The time between the date of filing the corporate income tax return
and the date when taxes are due to be paid
c. This is a period of time when corporations are relieved of paying
various taxes.
d. This is the deadline for filing federal tax returns.
3.
The Organization for Economic Cooperation and Development (OECD)
has established guidelines to eliminate tax havens. Why, then, can the
OECD (as of 2004) still identify over 30 countries as tax havens?
a. The definition of tax haven continuously changes.
b. The concept of tax haven is supported by the United Nations.
c. The OECD has no enforcement powers.
d. The OECD lacks the willingness to enforce the guidelines.
4.
Jane, a citizen of Country X, received a corporate dividend in the
amount of £10,000 from a company in the U.K. Country X did not tax
Jane's dividend. Country X is using what kind of approach toward
foreign source income?
a. nationality approach
b. worldwide approach
c. legalistic approach
d. territorial approach
.
5.
What causes double taxation?
a. a taxpayer being subject to tax laws in multiple jurisdictions
b. profits increasing excessively from year to year
c. penalties imposed by a taxing authority for non-payment of taxes
d. none of the above
6.
Under what condition may it be to the taxpayer's advantage to take a
deduction for total foreign taxes paid rather than a tax credit for foreign
income taxes?
a. if the foreign income tax rate is greater than the U.S. federal income
tax rate
b. if the foreign income tax rate is less than the U.S. federal income tax
rate
c. if foreign source income is less than domestic income
d. if foreign taxes other than income taxes are substantial
7.
Under U.S. tax law, what is the relationship between foreign tax credits
and the different categories of foreign source income?
a. FTC from one category can offset taxes owed on other categories.
b. Excess FTC from one category can be carried forward to offset
future U.S. taxes payable on another category.
c. Excess FTC from one category can be carried back to offset U.S.
taxes paid on another category in the prior year.
d. none of the above
8.
What term is used to describe a foreign corporation in which U.S.
shareholders hold more than 50% of the voting power or fair market
value of the corporation's stock?
a. branch
b. holding company
c. controlled foreign corporation
d. tax-exempt foreign corporation
9.
The exchange gain or loss on repatriated funds from a foreign branch is
calculated by multiplying the nominal amount of the funds by:
a. the difference between the exchange rate at the beginning of the year
and the exchange rate at the end of the year.
b. the difference between the exchange rate on the date of repatriation
and the exchange rate used to translate the branch's pretax income.
c. the difference between the current exchange rate and the exchange rate
at the end of the year.
d. the difference between the exchange rate on the date of repatriation and
the exchange rate at the beginning of the year.
10.
What is the main advantage of the American Jobs Creation Act of 2004
over the Tax Reform Act of 1986 relative to FTC baskets.
a. A newer tax act is always more advantageous.
b. It has much fewer baskets and, as a result, more chance that a
company won’t have excess unused FTC’s.
c. There is no advantage, as excess FTC’s from one basket still can’t be
used to offset tax in another basket.
d. The carryforward period for excess FTC’s was extended.