McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

تمرين 55

Freon Corporation, a U.S. corporation, manufactures air-conditioning and warm air heating equipment. Freon reported gross sales from this product group of $50,000,000, of which $10,000,000 was foreign source. The gross profit percentage for domestic sales was 15 percent, and the gross profit percentage from non-U.S. sales was 20 percent. Freon incurred R E expenses of $6,000,000, all of which were conducted in the United States.
a. What amount of the R E expense will be apportioned to foreign source income under the sales method
b. What amount of the R E expense will be apportioned to foreign source income under the gross income method
c. If Freon wants to maximize its foreign tax credit limitation, which method produces the better outcome