Tax Subject 5 - Filers Abroad

1. As a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax, regardless of where you are living.

True False

2. An individual who 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.

A. A permanent resident.
B. A resident alien.
C. A U.S. citizen.
D. A temporary resident.

3. To be considered a resident alien an individual must meet which test (s)?

A. No test is needed as long as the individual has U.S. income.
B. Either the green card test or the substantial presence test.
C. The substantial presence test only.
D. The green card test only.

4. You are considered a U.S. resident if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least

A. 31 days during the current year.
B. 183 days during the current year and the 2 preceding years.
C. Counting all the days of physical presence in the current year, but only 3 days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year.
D. Only A and B above.

5. Juan was physically present in the United States on 120 days in each 2008, 2009, and 2010. To determine if Juan meets the substantial presence test for 2010, count the full 120 days of presence in 2010, 40 days in 2009 (1/3 of 120) and 20 days in 2008 (1/6 of 120). As a result

A. Juan is considered a resident under the substantial presence test for 2010.
B. Juan is not considered a resident under the substantial presence test for 2010.
C. Juan's total for the 3-year period was 183 days so he is not considered a resident under the substantial presence test for 2010.
D. None of the above.

6. If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad.

True False

7. Your income, filing status, and age generally determine whether you must file an income tax return. If you are single, age 27, you must file an income tax return if your income from worldwide sources is at least

A. $9,350.
B. $11,500.
C. $8,950.
D. $10,750.

8. You must make all federal income tax determinations in your functional currency. The U.S. dollar is the functional currency for all taxpayers except some qualified business units (QBUs). A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Even if you have a QBU, you functional currency is the dollar if

A. You conduct the business in U.S. dollars and the principal place of business is located in the United States.
B. You choose to or are required to use the U.S. dollar as your functional currency.
C. The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities are conducted.
D. Any of the above.

9. Make all income tax determinations in your functional currency. Use the exchange rate prevailing when you receive, pay, or accrue the item. If there is more than one exchange rate, 

A. Use the rate that is higher and more advantageous.
B. Use the rate that was previously approved by the IRS.
C. Use the rate that most properly reflects your income.
D. Either A or B are correct.

10. If your functional currency is not the U.S. dollar, make all income tax determinations in your functional currency. At the end of the year,

A. Report your income in your currency and write in red ink "Used my currency" across the top of the first page of your return.
B. Translate the results, such as income or loss, into U.S. dollars to report on your income tax return.
C. Postpone the reporting of the income until functional currency can be determined.
D. None of the above.

11. If, because of restrictions in a foreign country, your income is not readily convertible into U.S. dollars or into other money or property that is readily convertible into U.S. dollars or into other money or property that is readily convertible into U.S. dollars, your income is "blocked" or "deferrable" income. You can

A. Report the income and pay your federal income tax with U.S. dollars that you have in the United States or in some other country.
B. Postpone the reporting of the income until it becomes unblocked.
C. Use the one that most properly reflects your income.
D. Either A or B above.

12. If you choose to postpone the reporting of foreign income that is blocked, you must file an information return with your tax return. For this information return, you should use

A. Form 673.
B. Form 2555 or Form 2555-EZ.
C. Another Form 1040 labeled "Report of Deferrable Foreign Income, pursuant to Rev. Rul. 74-351".
D. All of the above.

13. If you choose to postpone reporting blocked income and in a later year you wish to begin including it in gross income although it is still blocked, you

A. Must figure the amount you can pay to the IRS in nonconvertible foreign currency.
B. Should check to see whether that income is still blocked.
C. Must file Form 2555  or Form 2555-EZ.
D. Must obtain the permission of the IRS to do so.

14. Returns with a foreign address cannot be e-filed.

True False

15. If, at the end of the tax year, you are married and one spouse is a U.S. citizen, or resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U.S. resident. If you make this choice, 

A. You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect.
B. You must file a joint income tax return for the year you make the choice.
C. Neither of you can claim tax treaty benefits as a resident of a foreign country for a tax year for which the choice is in effect.
D. All of the above.

16. If you do not choose to treat your non-resident alien spouse as a U.S. resident, you may be able to use the

A. Single filing status.
B. Head of Household filing status.
C. Married filing jointly filing status.
D. Any of the above.

17. Sarah Jimenez, a U.S. citizen, is married to Arcadio, a non-resident alien. Sarah and Arcadio make the choice to treat Arcadio as a resident alien by attaching a statement to their joint return. Sarah and Arcadio must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. For the year they make the choice, Sarah and Arcadio

A. Must file separate returns.
B. Can file either joint or separate returns.
C. Must file a joint return.
D. None of the above.

18. If you choose to treat your non-resident alien spouse as a U.S. resident attach a statement, signed by both spouses to your joint return for the first tax year for which the choice applies. The statement should contain

A. A declaration that one spouse was a non-resident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year.
B. A declaration that you choose to be treated as U.S. residents for the entire tax year.
C. The name, address, and social security number (or individual taxpayer identification number) of each spouse.
D. All of the above.

19. The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U.S. citizen or resident alien at any time during the later tax year.

True False

20. Once made, the choice to be treated as a resident applies to all later years and cannot be suspended.

True False

21. Members of the Armed Forces receive many different types of pay and allowances which are always excluded from gross income.

True False

22. If you are a U.S. citizen with income from sources outside the United States (foreign income), you must report all of that income on your tax return, unless

A. You reside outside the United States.
B. You do not receive a Form W-2 or Form 1099.
C. The amounts that the U.S. law allows you to exclude.
D. This income is unearned income such as interest, dividends, capital gains, pensions, rents or royalties.

23. Certain taxpayers can exclude income earned in foreign countries. For 2012, this exclusion amount can be as much as $95,100. The foreign earned income exclusion applies to

A. The wages and salaries of military and civilian employees of the U.S. government.
B. Those who work at United States Armed Forces exchanges.
C. Armed Forces motion picture services, and similar personnel.
D. None of the above.

24. Residents of American Samoa may be able to exclude income from American Samoa, and this possession exclusion applies to wages and salaries of military employees of the U.S. Government.

True False

25. The pay you earn as a member of the Armed Forces may be subject to community property laws depending on

A. Your marital status.
B. Your domicile.
C. The nature of the payment.
D. All of the above.

26. Community property rules apply to married persons whose domicile during the tax year was in a community property state. The rules may affect your tax liability if you

A. File separate return.
B. Are divorced during the year.
C. Either A or B above.
D. File Married Filing Jointly.

27. Active duty military pay is subject to community property laws.

True False

28. To deduct moving expenses, you generally must meet certain time and distance tests unless you are member of the Armed Forces on active duty and you move because of a permanent change of station. A permanent change of station is

A. A move from your home to your first post of active duty.
B. A move from one permanent post of duty to another.
C. A move from your last post of duty to your home or to a nearer point in the United States.
D. All of the above.

29. If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. You can deduct expenses for

A. Moving household goods and personal effects.
B. Travel.
C. Both A and B above.
D. Moving household goods, travel and entertainment.

30. If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude amounts from your income such as

A. Active duty pay earned in any month you served in a Combat Zone.
B. Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submissions you made in a month you served in a Combat Zone.
C. A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a Combat Zone.
D. Any of the above.