Orono Corporation manufactured inventory in the United States and sold the inventory to customers in Canada. Gross profit from the sale of the inventory was $300,000. Title to the inventory passed FOB: destination. Under the 50/50 method, how much of the gross profit is treated as foreign source income for purposes of computing the corporation'sforeign tax credit in the current year?

Question

Quizplus · Accepted Answer

Under the 50/50 method, half of the gross profit ($150,000) is treated as foreign source income because title passed at destination, which means the sale was completed when the inventory arrived in Canada. The remaining half is treated as U.S. source income.

Orono Corporation Manufactured Inventory in the United States and Sold