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. $$\begin{array}{l}
\text { Fair market value }\
\begin{array} { l l }
\text { U.S. assets } & \$ 5,000,000 \
\text { Foreign assets } & \$ 10,000,000 \
\text { Tax book value: } & \
\text { U.S. assets } & \$ 2,000,000 \
\text { Foreign assets } & \$ 6,000,000
\end{array}
\end{array}$$ ? How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

Question

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. $$\begin{array}{l}
\text { Fair market value }\
\begin{array} { l l } 
\text { U.S. assets } & \$ 5,000,000 \
\text { Foreign assets } & \$ 10,000,000 \
\text { Tax book value: } & \
\text { U.S. assets } & \$ 2,000,000 \
\text { Foreign assets } & \$ 6,000,000
\end{array}
\end{array}$$ ? How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

Quizplus · Accepted Answer

Using fair market values for both U.S. and foreign assets will allocate more interest expense to foreign sources, maximizing the foreign tax credit (FTC).

Qwan, a US ? How Should Qwan Assign Its Interest Expense Between U