This two CPE hour course provides detailed and in-depth knowledge of the many rules governing the taxation of nonresident aliens. It is designed to help practitioners enhance their ability to provide high-quality tax preparation and tax compliance for this fast-growing segment of taxpayers. According to Census Bureau and other reports, Asian Americans and Hispanics are the fastest growing ethnic groups in the United States. Many members of these two groups have not yet achieved resident status and thus are taxed as nonresident aliens. Combine that with the ever-increasing number of foreign students in the United States on education visas, and the need for expertise in preparing income tax returns for nonresident aliens is apparent.
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Question 1
Correct
For purposes of the U.S. tax code, inbound transactions are best described as:
All transactions to which resident aliens are subject to U.S. taxation
Transactions that occur in the United States and that are engaged in by publicly held foreign corporations
(You Answered) (Correct Answer) Transactions occurring in the United States engaged in by foreign “persons”
All transactions occurring within the United States
Question 2
Incorrect
Which of the following statements about inbound transactions is incorrect?
Only taxpayers with sufficient nexus in or to the United States are subject to the tax on inbound transactions.
Inbound transactions include transactions that are effectively connected to a trade or business in the United States.
(Correct Answer) Inbound transactions consisting of FDAP income are taxed at regular U.S. tax rates.
(You Answered) All of the above are correct.
Question 3
Correct
Tests to determine whether income is effectively connected include all but which of the following?
(You Answered) (Correct Answer) Revenue determination test
Business activities test
Asset use test
All of the above tests are used to determine whether income is effectively connected.
Question 4
Correct
La Delish Cuisine, Inc., a company based in France, owns restaurants in the United States that it leases to residents and citizens of the United States. The rental income from the restaurants:
Is not effectively connected income
(You Answered) (Correct Answer) Is effectively connected income
Is effectively connected income only if the asset use test is met
Is effectively connected income only if the business activities test is met
Question 5
Incorrect
Code Sec. 1231 gains on the sale of business property located in the United States that are incurred by foreign entities:
(You Answered) Are taxed at a flat 30 percent rate
Are taxed at the lesser of 30 percent or a lower rate established by a treaty
(Correct Answer) Are taxed at regular U.S. tax rates
Are excludable from U.S. income
Question 6
Correct
Brandon DeJong, a citizen and resident of South Africa, won a prize sponsored by a U.S. company. The prize winnings would be:
Excludable from U.S. income because the prize winnings are not effectively connected
(You Answered) (Correct Answer) Generally be considered FDAP income
Taxed at regular U.S. tax rates
Generally be includable in U.S. income only if Brandon was in the United States
Question 7
Correct
Maria Lopez, a citizen and resident of Spain, has rental property located in the United States. She does not make any election with respect to the rental property. Which of the following is incorrect?
The rate of taxation on the rental revenue will not exceed 30 percent.
Maria may not deduct any expense against the rental revenue.
The revenue from the rental is FDAP income.
(You Answered) (Correct Answer) All of the above statements are correct.
Question 8
Correct
Humberto Higgins, an occasional gambler, won big at the roulette table in Las Vegas while visiting the United States. Humberto is a citizen and resident of the United Kingdom. His gambling winnings are:
(You Answered) (Correct Answer) Exempt from U.S. taxation
Taxed at a maximum rate of 30 percent
Taxed as effectively connected income
None of the above
Question 9
Correct
Ana Tamayo, a citizen and resident of Brazil, owns a restaurant in Iowa. In the current year the restaurant was destroyed by floods. With respect to U.S. tax, Ana has:
No deduction
(You Answered) (Correct Answer) A casualty loss to be deducted against her effectively connected income
A casualty loss to be deducted against her FDAP income
A capital loss
Question 10
Correct
Which of the following tax credits allowed to a nonresident alien is limited to their earned income?
Child tax credit
Adoption credit
Earned income credit
(You Answered) (Correct Answer) Child and dependent care credit