1. (LO 1) Distinguish between an outbound transaction and an inbound transaction from a U.S. tax perspective.
2. (LO 1) What are the major U.S. tax issues that apply to an inbound transaction?
3. (LO 1) What are the major U.S. tax issues that apply to an outbound transaction?
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4. (LO 1) How does a residence-based approach to taxing worldwide income differ from a source-based approach to taxing the same income.
5. (LO 1) Henri is a resident of the United States for U.S. tax purposes and earns $10,000 from an investment in a French company. Will Henri be subject to U.S. tax under a residence-based approach to taxation? A source-based approach?
6. (LO 1) What are the two categories of income that can be taxed by the United States when earned by a nonresident? How does the United States tax each category of income?
7. (LO 1) Maria is not a citizen of the United States, but she spends 180 days per year in the United States on business-related activities. Under what conditions will Maria be considered a resident of the United States for U.S. tax purposes?
8. (LO 1) Natasha is not a citizen of the United States, but she spends 200 days per year in the United States on business. She does not have a green card. True or False. Natasha will always be considered a resident of the United States for U.S. tax purposes because of her physical presence in the United States. Explain.
9. (LO 1) Why does the United States allow U.S. taxpayers to claim a credit against their precredit U.S. tax for foreign income taxes paid?
10. (LO 1) What role does the foreign tax credit limitation play in U.S. tax policy?
11. (LO 2) Why are the income source rules important to a U.S. citizen or resident?
12. (LO 2) Why are the income source rules important to a U.S. nonresident?
13. (LO 2) Carol receives $500 of dividend income from Microsoft, Inc., a U.S. company. True or False. Absent any treaty provisions, Carol will be subject to U.S. tax on the dividend regardless of whether she is a resident or nonresident. Explain.
14. (LO 2) Pavel, a citizen and resident of Russia, spent 100 days in the United States working for his employer, Yukos Oil, a Russian corporation. Under what conditions will Pavel be subject to U.S. tax on the portion of his compensation earned while working in the United States?
15. (LO 2) What are the potential U.S. tax benefits from engaging in a §863(b) sale?
16. (LO 2) True or False. A taxpayer will always prefer deducting an expense against U.S. source income and not foreign source income when filing a tax return in the United States. Explain.
17. (LO 2) Distinguish between allocation and apportionment in sourcing deductions in computing the foreign tax credit limitation.
18. (LO 2) Distinguish between a definitely related deduction and a not definitely related deduction in the allocation and apportionment of deductions to foreign source taxable income.
19. (LO 2) Briefly describe the two different methods for apportioning interest expense to foreign source taxable income in the computation of the foreign tax credit limitation.
20. (LO 2) Briefly describe the two different methods for apportioning R&E to foreign source taxable income in the computation of the foreign tax credit limitation.
21. (LO 2) IBM incurs $250 million of R&E in the United States. How does the exclusive apportionment of this deduction differ depending on the R&E apportionment method chosen in the computation of the foreign tax credit limitation?
22. (LO 3) What is the primary goal of the United States in negotiating income tax treaties with other countries?
23. (LO 3) What is a permanent establishment and why is it an important part of most income tax treaties?
24. (LO 3) Why is a treaty important to a nonresident investor in U.S. stocks and bonds?
25. (LO 3) Why is a treaty important to a nonresident worker in the United States?
