Tax Consulting International Tax Fundamentals 2

Question 1

Under the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions must report information about:

Accepted Answer

Accounts held by US persons to the IRS

Answer

FATCA requires foreign financial institutions to identify and report to the IRS information about financial accounts held by US persons or foreign entities with substantial US ownership.

Question 2

The GILTI (Global Intangible Low-Taxed Income) provision enacted by the TCJA primarily affects:

Accepted Answer

US corporations with controlled foreign subsidiaries earning income above a routine return

Answer

GILTI taxes US corporations on the excess of their CFC net income above a 10% deemed return on tangible assets, targeting intangible income shifted to low-tax jurisdictions.

Question 3

What is a tax treaty's primary function in international taxation?

Accepted Answer

Preventing double taxation and allocating taxing rights between two countries

Answer

Tax treaties between countries allocate taxing rights over various income types, reduce withholding tax rates, and provide mechanisms to eliminate double taxation.

Question 4

Which form must US persons file to report ownership or control of foreign corporations where they own 10% or more?

Accepted Answer

Form 5471

Answer

Form 5471 (Information Return of US Persons With Respect to Certain Foreign Corporations) must be filed by US persons with significant ownership interests in foreign corporations.

Question 5

The base erosion and anti-abuse tax (BEAT) under the TCJA applies to:

Accepted Answer

Large US corporations making significant deductible payments to related foreign parties

Answer

BEAT imposes a minimum tax on large US corporations (gross receipts over $500 million) that make substantial deductible payments to related foreign parties, preventing base erosion.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting International Tax Fundamentals 2