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. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

Question

Quizplus · Accepted Answer

The gross profit from the sale of inventory would be treated as domestic source income because the title passed FOB destination, meaning the sale is considered to have occurred in the United States, not in Canada. Therefore, none of the gross profit is treated as foreign source income for the purpose of computing the corporation's foreign tax credit.

Orono Corporation Manufactured Inventory in the United States and Sold