Question 28 of 44 2 Points USACo wants to borrow money from HKco, a Hong Kong corporation. The U.S. does not have a tax treaty with Hong Kong, but both the U.S. and Hong Kong do have a treaty with country F that eliminates all withholding taxes. To avoid the 30 percent withholding tax that USAco must withhold on all interest payments to HKco, HKco forms FORco, a country F corporation, which will borrow the money from HKco and relend the money to USAco. This tax planning technique: A. will work due to the Non-Discrimination Article of the Model Treaty. B. will work because the US has no tax treaty with Hong Kong. C. will fail because of the Limitation on Benefits Article of the Model Treaty. D. will fail because of the Permanent Establishment Article of the Model Treaty. Reset Selection Question 28 of 44 2 Points USACo wants to borrow money from HKco, a Hong Kong corporation. The U.S. does not have a tax treaty with Hong Kong, but both the U.S. and Hong Kong do have a treaty with country F that eliminates all withholding taxes. To avoid the 30 percent withholding tax that USAco must withhold on all interest payments to HKCO, HKco forms FORco, a country F corporation, which will borrow the money from HKco and relend the money to USAco. This tax planning technique: A. will work due to the Non-Discrimination Article of the Model Treaty. B. will work because the US has no tax treaty with Hong Kong. C. will fail because of the Limitation on Benefits Article of the Model Treaty. D. will fail because of the Permanent Establishment Article of the Model Treaty. Reset Selection Question 29 of 44 2 Points Which of the following is an exception to the general rule for computing Subpart F income? A. No part is treated as Subpart Fincome if amount is less than both $1 million and 5% of the CFC's total gross income for the year. B. All of the CFC's gross income is treated as Subpart Fincome if the sum exceeds 70% of the CFC's total gross income for the year. C.Can elect to exclude from Subpart F income if subject to an effective tax rate exceeding 90% of the maximum US corporate tax rate. D. All of the above E. None of the above Reset Selection Question 30 of 44 2 Points USAco, a domestic corporation leases testing equipment to an unrelated US corporation ("Lessee") for a flat fee of $50,000. The Lessee uses the equipment at manufacturing plants located both in the US and abroad. The Lessee uses the equipment in the US for 40 days and abroad for 60 days. The rental income is: A. $50,000 U.S.-source because USAco is a domestic corporation. B. $50,000 U.S.-source because the Lessee is a domestic corporation. C. $25,000 U.S.-sourced and $25,000 Foreign-sourced under the 50-50 method. D. $20,000 U.S.-sourced and $30,000 Foreign-sourced based on relative use. Reset Selection Question 31 of 44 2 Points For purposes of calculating a US taxpayer's Base Erosion Anti-Avoidance Tax ("BEAT"), modified taxable income means the taxable income of the taxpayer determined without regard to any base erosion payment. A base erosion payment generally means any amount paid or accrued by a taxpayer to and with respect to which a deduction is allowable. A. a foreign person that is a related party of the taxpayer B. a foreign person that is not a related party of the taxpayer C. a US person that is a related party of the taxpayer D. a US person that is not a related party of the taxpayer Reset Selection
