1. Generally, a foreign person is subject to U.S. tax on his or her U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of
A.
15%.
B.
20%.
C.
30%.
D.
38%.
2. This is the person responsible for withholding on payments made to a foreign person. However, if this person can reliably associate the payment with documentation from a U.S. person, he or she is not required to withhold.
A. A withholding agent.
B.
Person subject to NRA.
C.
Foreign intermediary.
D.
Beneficial owners.
3. You are a withholding agent
A. If
you are a U.S. or foreign person that has control, receipt, custody, disposal,
or payment of any item of income of a foreign person that is subject to
withholding.
B.
Even if there is no requirement to withhold from a payment.
C.
Even if another person has withheld the required amount from a payment.
D.
Any of the above.
4. If the determination of the source of income or the amount subject to tax depends on facts that are not known at the time of payment, you must withhold an amount sufficient to ensure that at least 30% of the amount subsequently determined to be subject to withholding is withheld. Sometimes, you must withhold more than 30% of the total amount paid.
True False
5. An exception form reporting may apply to individuals who are not required to withhold from a payment and who do not make the payment in the course of their trade or business. If required to withhold, you must report payments subject to NRA withholding on
A. Form
1042-S and to file a tax return on Form 1042.
B. Form
1040-S and to file a tax return on Form 1040.
C.
Form 1040NR-S and to file a tax return on Form 1040NR.
D.
None of the above.
6. If you make a payment to a U.S. person and you have actual knowledge that the U.S. person is receiving the payment as an agent of a foreign person, you
A. Must treat the payment as made to a U.S. person.
B. Must
treat the payment as made to the foreign person.
C.
Must send by mail petitioning the U.S. person to furnish the foreign person
identifying information.
D.
None
of the above.
7. If the payment is not subject to NRA withholding (for example, gross proceeds from the sale of securities), you must treat the payment as made to a U.S. person and not as a payment to a foreign person.
True False
8. The payees of payments (other than income effectively connected with a U.S. trade or business) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. The following is a flow-through entity.
A. A
partnership (other than a withholding foreign partnership).
B. A
foreign simple or foreign granter trust (other than a withholding foreign
trust).
C. A
fiscally transparent entity receiving income for which treaty benefits are
claimed.
D.
All of the above.
9. A trust is foreign unless it meets the following test.
A. A
court within the United States is able to exercise primary supervision over the
administration of the trust.
B. One
or more U.S. persons have the authority to control all substantial decisions of
the trust.
C.
Both A and B above.
D.
Either A or B above.
10. A resident alien in an individual that is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year. Under the substantial presence test, the individual must be physically present in the United States on
A. At
least 31 days during the current calendar year.
B. At
least 183 days during the current year and the 2 preceding year, counting all
the days of physical presence in the current year, but only 1/3 the number of
days of presence in the first preceding year, and only 1/6 the number of days in
the second preceding year.
C.
Both A and B above.
D.
Either A or B above.
11. A bona fide resident of Puerto Rico, the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U.S. citizen or a U.S. national is treated as a nonresident alien for the withholding rules. A bona fide resident of a possession is someone who
A.
Meets the presence test.
B. Does
not have a tax home outside the possession.
C.
Does not have a closer connection to the U.S., or to a foreign country than to
the possession.
D. All
of the above.
12. Generally, you must withhold 30% from the gross amount paid to a foreign payee unless you can reliably associate the payment with valid documentation that establishes
A. The payee is a U.S. person.
B. The payee is a foreign person that is the beneficial owner of the income and
is entitled to a reduced rate of withholding.
C. Either A or B above.
D.
The payee is a foreign person.
13. Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding is used by a foreign person to
A.
Establish foreign status.
B. Claim that such person is the beneficial owner of the income for which the
form is being furnished or a partner in a partnership subject to section 1446
withholding.
C. Claim a reduced rate of, or exemption from withholding under an income tax
treaty.
D.
All of the above.
14. Form W-8ECI, Certificate of Foreign Person's Claim that Income is Effectively Connected with the Conduct of a Trade or Business in the United States is used by a foreign person for the following, except:
A. To establish foreign status.
B. To claim that the income is effectively connected with the conduct of a trade
or business in the United States.
C. To claim a reduced rate of, or exemption from, withholding under an income
tax treaty.
D. To
claim that such person is the beneficial owner of the income for which the form
is being furnished.
15. You have reason to know that a Form W-8 provided by a direct account holder that is a foreign person is unreliable or incorrect if
A. The Form W-8 is incomplete with respect to any item on the form that is
relevant to the claims made by the account holder.
B. The Form W-8 contains any information that is inconsistent with the account
holder's claim.
C. The Form W-8 lacks information necessary to establish entitlement to a
reduced rate of withholding, if a reduced rate is claimed or you have
information not contained on the form that is inconsistent with the claims made
on the form.
D.
Any of the above.
16. A financial institution that receives documentation from a payee through a nonqualified intermediary, a flow-through entity, or a U.S. branch of a foreign bank or insurance company subject to U.S. or state regulatory supervision has reason to know that the documentary evidence is unreliable or incorrect if a reasonably prudent person in the financial institution's position would question the claims made.
True False
17. A payment is subject to NRA withholding if it is from sources within the United States, and if it is a fixed or determinable annual or periodical (FDAP) income, or
A. Portfolio interest on bearer obligations or foreign-targeted registration
obligations if those regulations meet certain requirements.
B. Insurance premiums paid on a contract issued by a foreign insurer.
C. Certain gains from the disposition of timber, coal, and iron core, or from
the sale or exchange of patents, copyrights, and similar intangible property.
D. Bank deposit interest that is not effectively connected with the conduct of a
U.S. trade or business.
18. The factor to be considered in establishing whether FDAP income and similar amounts are effectively connected with a U.S. trade or business include
A. Whether the income is from assets used in, or held for use in, the conduct of
that trade or business.
B. Whether the activities of that trade or business were a material factor in
the realization of the income.
C. Either A or B above.
D. Foreign person does not engage in trade or business in the United States.
19. Illegal aliens who are resident aliens and who receive income from performing dependent personal services are subject to the same reporting and withholding obligations which apply to U.S. citizens who receive the same kind of income.
True False
20. Every withholding agent, whether U.S. or foreign, must file Forms 1042 and 1042-S to report payments of amounts subject to NRA withholding unless an exception applies. Use Form 1042 and Form 1042-S to report tax withheld on
A. Wages,
salaries, or other compensation reported on Form W-2.
B. Dispositions of
U.S. real property interests by foreign persons.
C. Pensions,
annuities, and certain other deferred income reported on Form 1099 and income,
social security, and Medicare taxes on wages paid to a household employee
reported on Schedule H (Form 1040).
D. None of the
above.
21. An agent is any person who represents the transferor or transferee in any negotiation with another person (or another person's agent) relating to the transaction, or in settling the transaction. A person is not treated as an agent if the person only performs
A. Receipt and
disbursement of any part of the consideration.
B. Recording of
any document.
C. Obtaining title
insurance report and reports concerning the condition of the property.
D. Any of the
above.
22. You do not have to withhold if the property disposed of is an interest in a domestic corporation if any class of stock of the corporation is regularly traded on an established securities market....
True False
23. Publicly traded trusts must use Form 1042 and Form 1042-S to report and pay over tax withheld on distributions from dispositions of U.S. real property interests.
True False
24. A transferee must deduct and withhold a tax equal to 10% (or other amount) of the total amount realized by the foreign person on the disposition. The amount realized is
A. The cash paid,
or to be paid (principal only).
B. The fair market
value of other property transferred, or to be transferred.
C. The amount of any
liability assumed by the transferee or to which the property is subject
immediately before and after the transfer.
D. The sum of A, B
and C above.
25. A penalty may be imposed for failure to file Form 1042-S when due (including extensions) or for failure to provide complete and correct information. The penalty for each Form 1042-S is
A. $15 if you file
a correct form within 30 days, with a maximum penalty of $75,000 per year
($25,000 for a small business).
B. $30 if you file
after 30 days but by August 1, with a maximum penalty of $150,000 ($50,000 for a
small business).
C. $50 if you file
after August 1 or do not file a correct form, with a maximum penalty of $250,000
per year ($100,000 for a small business).
D. Any of the
above.
26. The penalty for not filing Form 1042 when due (including extensions) is usually
A. 5% (but not
more than 25%) for each month or part of month it is late.
B. 10% (but not
more than 25%) for each month or part of month it is late.
C. 15% (but not
more than 25%) for each month or part of month it is late.
D. Up to 50% for
each month or part of month it is late.
27. The foreign partner's share of the partnership's gross effectively connected income is reduced by the partner's share of partnership deductions connected to that income for the year and
A. The
foreign partner's partner-level deductions and losses that the partner certifies
to the partnership as reasonably expected to be available and claimed on the
partner's U.S. income tax return.
B. The
partner's tax treaty benefits related to that income.
C.
State and local income taxes the partnership withholds and pays on behalf of the
partner on current year effectively connected taxable income allocated to the
partner.
D.
All of the above.
28. If at the end of a calendar year the total amount of undeposited taxes is less than $200, you may either pay the taxes with your Form 1042 or deposit the entire amount by the due date of your Form 1042.
True False
29. The following is a true statement regarding the electronic deposit requirement.
A. You
must use the Electronic Federal Tax Payment System (EFTPS) to make electronic
deposits of all depository tax liabilities you incur in 2008, if you had to make
electronic deposits in 2008.
B. You
must use EFTPS if you deposited more than $200,000 in federal depository taxes
in 2007.
C.
You can always choose to make electronic deposits or sent them them by mail.
D.
Both A and B above.
30. To qualify for the exemption from withholding during the tax year, a Canadian or Mexican resident must give the employer a statement with name, address, and identification number, and certifying that the resident
A. Is
not a U.S. citizen or resident.
B. Is
a resident of Canada or Mexico.
C.
Expects to perform the described duties during the tax year in question.
D.
All of the above.