1)A, a U.S. income tax nonresident alien, owns 9% of the shares of a U.S. corporation and A makes a $1,000,000 loan to such corporation at an annual 10% interest rate. Assume that the loan satisfies the requirements of the IRC 871(h) so-called portfolio interest exemption. Because the interest constitutes U.S. source fixed or determinable, annual or periodical income and is not effectively connected with the conduct of a U.S. trade or business, A will be subject to tax on the interest income as follows:

a. At the flat 30% rate.

b. It is exempt from U.S. income tax.

c. At the IRC 1 graduated tax rates.

d. At the IRC 1 graduated tax rates only if A makes an election to be so taxed.

2)T, a U.S. citizen/tenant, pays non-U.S. trade or business-related passive rent to A, the U.S. income tax nonresident alien landlord. If T fails to property withhold at the 30% flat rate (assuming no exceptions are otherwise available), T will be liable for interest, penalties and additions to tax in respect of such failure even if A files a timely U.S. individual income tax return, Form 1040NR, and properly pays tax on the rents received from T.

True _____ False _____

3)FGP, a Florida general partnership, is engaged in the active U.S. trade or business of operating 3 hotels. The partners include A, a U.S. income tax nonresident alien; C, a U.S. citizen; and FC, a foreign corporation. Assuming FGP generates effectively connected taxable income, FGP must withhold U.S. income tax only when distributions are made to A and FC.

True _____ False _____

4)A, a U.S. income tax nonresident alien, has the following U.S. source fixed or determinable, annual or periodical income which is not otherwise effectively connected with the conduct of a U.S. trade or business:

1. (i) $10,000 in dividends from a Florida corporation which does all of its business in Florida;
2. (ii) $30,000 of interest income on certificates of deposit with a Florida bank;
3. (iii) $20,000 of interest from FLACO, a Florida corporation, which meets the 80% foreign business requirements test of IRS 861(c); and
4. (iv) $15,000 of interest from FLACO, a Florida corporation, owned 91% by As U.S. income tax resident alien father and 9% by A.

Which of these items of income are exempt from U.S. withholding tax?

a. (i) and (ii)

b. (ii) and (iii)

c. (i) and (iii)

d. (iv)

5)FLACO, a Florida corporation, develops and sells houses and condominium units in Orlando, Florida. Many of the buyers come from England and FLACO pays commissions to foreign persons (either U.S. income tax nonresident aliens or foreign corporations) who, in England, meet with the potential buyer to: (i) discuss the development concept including prices, payment terms, benefits, etc.; (ii) show films of the development as well as certain attractions in the Orlando vicinity; and (iii) arrange for the potential buyer to visit the Orlando sales office with the hope that a sale is consummated. FLACO will not have to withhold U.S. income tax on commissions paid to such foreign persons.

True _____ False _____

6)A, a U.S. income tax nonresident alien, visits the U.S. for the first time ever in 2018 and plans to stay for 90 days. On the 90th day, A is involved in a serious car accident and for medical reasons he is required to remain in the U.S. for an additional 95 days. In need of cash, A sells shares of stock in IBM Corporation and realizes a $200,000 gain. A will be subject to U.S. income tax on the $200,000 gain.

True _____ False _____

7)If FC, a foreign corporation, is engaged in a U.S. trade or business, its U.S. source fixed or determinable, annual or periodical income will automatically be subject to U.S. income tax on a net basis at graduated rates.

True _____ False _____

8)When determining the effectively connected taxable income of a U.S. income tax nonresident alien, deductions are generally limited to otherwise allowable business deductions effectively connected with such trade or business. However, the following deductions are available whether or not they are effectively connected with such U.S. trade or business:

a. Casualty and theft losses of property located within the U.S. b. Charitable contributions qualifying under IRC 170.

b. Personal residence mortgage interest.

c. All of the above.

d. a. and b. only.

9)FC, a foreign corporation engaged in a U.S. trade or business, pays interest on a loan to A, a U.S. income tax nonresident alien. A is a 15% shareholder in FC. A will be subject to the 30% U.S. withholding tax on such interest income.

True _____ False _____

10) In 2017, A is a U.S. income tax nonresident alien but on July 1, 2018, A obtains an immigration permanent resident alien green card thus becoming a U.S. income tax resident alien. In 1980, while a U.S. income tax nonresident alien, A acquired shares of stock in a foreign corporation at a cost of $100,000 and on September 1, 2018, A sells such shares for $1,100,000. On July 1, 2018, the date on which A became a U.S. income tax resident alien, the shares had a fair market value of $1,200,000. A will be subject to U.S. income tax as follows:

a. On the full$1,100,000 amount realized.

b. On the $1,000,000 difference between the amount realized and As cost basis.

c.$ -0- because the shares had a fair market value which was greater on the day that A became a U.S. income tax resident alien then on the date of As sale.

d. On the$1,200,000 fair market value at the date A became a U.S.income tax resident alien.