During the current year, USACo (a domestic corporation) sold equipment to FrenchCo, a foreign corporation, for
$350,000, with title passing to the buyer in France. USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment, all of which were allocated to U.S.-source income. USACo's adjusted basis in the equipment is $20,000 on the date of sale. What is the source of the $330,000 gain on the sale of this equipment?

Question

Quizplus · Accepted Answer

The $250,000 gain is sourced to foreign income because the property was sold to a foreign corporation and the title passed in a foreign country. The $80,000 of depreciation deductions previously taken by USACo were allocated to U.S.-source income, which means that portion of the gain is sourced to U.S. income. Therefore, the gain is sourced to $250,000 foreign income and $80,000 U.S. income.

During the Current Year, USACo (A Domestic Corporation) Sold Equipment