Tax Consulting International Tax Fundamentals

Question 1

Under US tax law, on what basis are US citizens and resident aliens taxed?

Accepted Answer

On worldwide income regardless of where earned or where they live

Answer

The US taxes its citizens and resident aliens on their worldwide income, regardless of where the income is earned or where the taxpayer resides.

Question 2

The Foreign Tax Credit (FTC) is designed to prevent:

Accepted Answer

Double taxation of foreign income by allowing a credit for taxes paid to foreign governments

Answer

The Foreign Tax Credit allows US taxpayers to credit taxes paid to foreign governments against their US tax liability on the same income, preventing the same income from being taxed twice.

Question 3

The Foreign Earned Income Exclusion (FEIE) allows qualifying US citizens abroad to exclude how much foreign earned income in 2024?

Accepted Answer

$126,500

Answer

For 2024, qualifying US citizens and resident aliens living abroad may exclude up to $126,500 of foreign earned income from US taxable income under the FEIE.

Question 4

What test allows a US citizen to qualify for the Foreign Earned Income Exclusion based on physical presence in a foreign country?

Accepted Answer

Physical Presence Test (330-day rule)

Answer

The Physical Presence Test requires a taxpayer to be physically present in a foreign country for at least 330 full days during any 12 consecutive months to qualify for the FEIE.

Question 5

Controlled Foreign Corporation (CFC) rules under Subpart F are designed to prevent:

Accepted Answer

US shareholders from deferring tax on passive income accumulated in foreign corporations

Answer

Subpart F requires US shareholders who own 10% or more of a CFC to include certain passive and mobile income in their US taxable income currently, preventing tax deferral through foreign subsidiaries.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting International Tax Fundamentals