Topic 47 - Taxation of Aliens

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You will need IRS Publication 519 and FTB Publication 1031 to complete this topic.

1. You are a resident for tax purposes if you are a lawful permanent resident of the United States at any time during calendar year 2007. This is knows as

a. The "Green Card" test.
b. The "Substantial Presence" test.
c. The "Resident Alien" test.
d. The "Tax Home" test.

2. An administrative or judicial determination of abandonment of resident status may be initiated by

a. The resident status holder.
b. The USCIS.
c. A U.S. consular officer.
d. Any of the above.

3. You were physically present in the United States on 120 days in each of the years 2005, 2006, and 2007. To determine if you meet the substantial presence test for 2007, count the full 120 days of presence in 2007, 40 days in 2006 (1/3 of 120) and 20 days in 2005 (1/6 of 120). Because the total for the 3-year period is 180 days,

a. You are considered a resident under the substantial presence test for 2007.
b. You are considered a resident under the green card test for 2007.
c. You are not considered a resident under the substantial presence test for 2007.
d. None of the above.

4. The term United States includes the following areas, except

a. U.S. possessions and territories.
b. All 50 states and the District of Columbia.
c. The territorial waters of the United States.
d. The seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources.

5. You are treated as present in the United States on any day you are physically present in the country at any time during the day. Do not count the following days of presence in the United States for the substantial presence test.

a. Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico.
b. Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States.
c. Days you are unable to leave the United States because of a medical condition that arose while you are in the United States.
d. Any of the above.

6. You can exclude days of presence in the United States under the following circumstance (s).

a. You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave.
b. You returned to the United States for treatment of a medical condition that arose during a prior year. 
c. The condition existed before your arrival in the United States and you were aware of the condition and it does not matter whether you needed treatment for the condition when you entered the United States.
d. None of the above.

7. Do not count days for which you are in exempt individual. The term "exempt individual" does not refer to

a. An individual temporarily present in the United States as a foreign government-related individual.
b. Someone exempt from U.S. tax.
c. A teacher or trainee temporarily present in the United States under a "J" or "Q" visa, who substantially complies with the requirements of the visa.
d. Any of the above.

8. If you are a dual-resident taxpayer and you claim treaty benefits, you must file a return by the due date (including extensions) using _________ and compute your tax as a nonresident alien.

a. Form 1040 (or Form 1040-EZ).
b. Form 1041 (or Form 1041-EZ).
c. Form 1040NR (or Form 1040 NR-EZ).
d. None of the above.

9. If you are dual-status alien, you can choose to be treated as a U.S. resident for the entire year if

a. You are a nonresident alien at the beginning of the year.
b. You are a resident alien or U.S. citizen at the end of the year.
c. You are married to a U.S. citizen or resident alien at the end of the year and your spouse joins you in making the choice.
d. All of the above.

10. If you do not meet either the green card test or the substantial presence test for 2006 or 2007 and you did not choose to be treated as a resident for part of 2006, but you meet the substantial presence test for 2008, you can choose to be treated as a U.S. resident for part of 2007. To make this choice, you must

a. Be present in the United States for at least 31 days in a row in 2007.
b. Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2007.
c. Not count the days you were in the United States under any of the exceptions.
d. All of the above.

11. A long term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions.

True False

12. A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report only amounts from sources within the United States.

True False

13. A nonresident alien usually is subject to U.S. income tax only on U.S. source income.

True False

14. The term "foreign employer" does not include

a. A nonresident alien individual, foreign partnership, or foreign corporation.
b. An office or place of business maintained in a foreign country or in a U.S. possession by a U.S. corporation, a U.S. partnership, or an individual who is a U.S. citizen or resident.
c. A foreign government.
d. All of the above.

15. Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.S. tax and must be reported on their U.S. tax return.

True False

16. A nonresident alien's income that is subject to U.S. income tax must be divided into two categories. The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates as U.S. citizens and residents. Income that is not effectively connected is taxed at a

a. Flat 30% rate.
b. Flat 20% rate.
c. Flat 15% rate.
d. Flat 10% rate.

17. Nonresident aliens who are residents of the Republic of Korea (South Korea) may be able to claim exemptions for a spouse and children.

True False

18. The income tax treaty with the Republic of Korea (South Korea) imposes additional requirements on Korean residents to be able to claim exemptions for spouse and children. This would apply for the following:

a. The spouse and all children claimed must live with the alien in the United States at some time during the tax year.
b. The additional deduction for the exemption must be prorated based on the ratio of the alien's U.S. source gross income effectively connected with a U.S. trade or business for the tax year to the alien's entire income from all sources during the tax year.
c. The spouse and all the children do not need to live with the alien in the United States at any time during the tax year.
d. Both A and B above.

19. Nonresident aliens who are required to file an income tax return should use

a. Form 1040 (or 1040-EZ).
b. Form 1040NR (or 1040NR-EZ).
c. Both A and B.
d. None of the above.

20. A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during 2007. You must file even if

a. Your income did not come from a trade or business conducted in the United States.
b. You have no income from U.S. sources.
c. You income is exempt from income tax.
d. Any of the above.

21. Nonresident aliens must file a return if they are

a. A nonresident alien individual not engaged in a trade or business in the United States with U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.
b. A representative or agent responsible for filing the return of an individual who is required to file.
c. A fiduciary for a nonresident alien estate or trust.
d. Any of the above.

22. Nonresident aliens must file an income tax return if they want to

a. Claim a refund of over-withheld or overpaid tax.
b. Claim the benefit of any deductions or credits.
c. Both A and B.
d. None of the above.

23. You will not have to pay a penalty if you show a good reason for the way you treated an item. You must also show that you acted in good faith.

True False

24. You must let your employer know whether you are a resident or a nonresident alien so your employer can withhold the correct amount of tax from your wages. If you are a nonresident alien, you must furnish to your employer to establish that you are a foreign person a

a. Form 8233.
b. Form W-8BEN.
c. Form W-9.
d. Either A or B.

25. A nonresident alien should use Form 1040-ES to figure and pay estimated tax.

True False

26. If you are required to report the treaty benefits but do not, you may be subject to a penalty for each failure. The penalty is

a. $500 for each failure. 
b. $10,000 for each failure.
c. $1,000 for each failure.
d. $1,000 maximum.

27. If you claim treaty benefits that override or modify any provision of the Internal Revenue Code, and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833 to your tax return. You must file a U.S. tax return and Form 8833 if

a. You claim a reduction or modification in the taxation of gain or loss from the disposition of a U.S. real property interest based on a treaty.
b. You claim a credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code.
c. You received payments or income items totaling more than $100,000 and you determine your country of residence under a treaty and not under the rules for residency.
d. Any of the above.

28. The United States and France have an agreement to relieve double taxation of U.S. permanent residents who receive wages and pensions for governmental services performed for the government of France. The United States will allow a credit for taxes paid to France on this income.

True False

29. If you are not a U.S. citizen, or if you are a U.S. citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U.S. tax if the services you perform are similar to those performed by U.S. government employees in that foreign country and that foreign government grants an equivalent exemption.

True False

30. Before leaving the United States, all aliens (unless those that are not required to obtain sailing or Departure permits) must obtain a certificate of compliance. This document is part of the income tax form you must file before leaving.

True False

31. Residents of California are taxed on all income, except income from sources outside California.

True False

32. For California a resident in any individual who is

a. In California for other than a temporary or transitory purpose.
b. Domiciled in California, but outside California for a temporary or transitory.
c. Any individual who is a California resident for part of the year and a nonresident for part of the year.
d. Both A and B above.

33. The underlying theory of residency is that you are a resident of the place you have the closest connections.

True False

34. You an your spouse are California residents. You accept a contract to work in South America for 16 months. You lease an apartment near the job site. You contract states that your employer will arrange your return back to California when your contract expires. Your spouse and children will remain in California residing in the home you own.

a. You are not taxed on income from South America.
b. You are taxed on income from all sources, including income earned in South America.
c. You are taxed only on the part of income earned in California as a part year resident.
d. None of the above.

35. You are a resident of California. You accept a 15-month assignment in Saudi Arabia. You put your personal belongings, including your automobile, in storage in California. You have a California driver's license and are registered to vote in California. You maintain bank accounts in California. In Saudi Arabia, you stay in a compound provided for you by your employer, and the only ties you establish there are connected to you employment. Upon completion of your assignment, you will return to California.

a. You are not taxed on income from Saudi Arabia.
b. As a California resident, your income from all sources is taxable by California, including the income that you earned for your assignment in Saudi Arabia.
c. You are taxed only on the part of income earned in California as a part year resident.
d. None of the above.

36. A tax treaty between the U.S. Government and a foreign country may exempt some types of income from federal taxation. Generally, unless the treaty specifically excludes the income form taxation by California, the income is taxable.

True False

37. The Franchise Tax Board issues tax clearance certificates for individuals in the same manner that a federal income tax clearance is issued.

True False

38. California does not allow a foreign tax credit or a foreign earned income exclusion.

True False

39. The wages of nonresident flight personal (e.g. pilot, copilot, flight attendant) are taxable by California if more than 50% of the individual's schedule flight time is in California.

True False

40. A merchant seaman who is in California only this state is a port-of-call and who maintains no other contact or connections with this state, is a resident.

True False