5. Kerry is a U.S. citizen residing in Portugal. Kerry receives some investment income
from Spain. Why might Kerry be expected to pay taxes on the investment income to
the United States?
a. The United States taxes its citizens on their worldwide income.
b. The United States taxes its citizens on the basis of residency.
c. Portugal requires all of its residents to pay taxes to the United States.
d. None of the above
6. Poole Corporation is a U.S. company with a branch in China. Income earned by the Chinese branch is taxed in both China, at the corporate income tax rate of 25 percent, and the United States, at the rate of 21 percent. What is this an example of?
a. Capital-export neutrality.
b. Double taxation.
c. A tax treaty.
d. Taxation on the basis of consumption.
7. What are the methods used by the United States to reduce the double taxation of income earned by foreign operations of U.S. companies?
a. Exempting some foreign source income and allowing a deduction for all foreign taxes paid.
b. Allowing a deduction for all foreign taxes paid and providing a foreign tax credit for foreign income taxes paid.
c. Exempting some foreign source income and providing a foreign tax credit for for eign income taxes paid.
d. Exempting some foreign source income, allowing a deduction for all foreign taxes paid, and providing a foreign tax credit for foreign income taxes paid.
8. Jordan Inc., a U.S. company, is required to translate into U.S. dollars the foreign cur rency income generated by its foreign branch. To determine U.S. taxable income, what must Jordan use to translate the net income of its foreign branch into U.S. dollars?
a. The exchange rate at the end of the year.
b. The average exchange rate for the year.
c. The exchange rate at the beginning of the year.
d. The previous year's ending exchange rate.