Qwan,a U.S.corporation,reports $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.Qwan's U.S.and foreign assets are reported as follows. $\begin{array}{lr}
\text {Fair market value}-\
~~~\text { U.S. assets } & \$~~ 5,000,000 \
~~~\text { Foreign assets } & \$ 10,000,000\
\text {Tax book value}-\
~~~\text { U.S. assets } & \$ 2,000,000 \
~~~\text { Foreign assets } & \$ 6,000,000
\end{array}$ How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

Question

Quizplus · Accepted Answer

Using fair market values maximizes the foreign tax credit (FTC) because it allocates more interest expense to foreign sources, given the higher proportion of foreign assets in fair market value terms.

Qwan,a USCorporation,reports $250,000 Interest Expense for the Tax Year How Should Qwan Assign Its Interest Expense Between U