Camellia Corporation,a U.S.corporation,incurred $600,000 of research and experimental (R&E)expenses during 2017.Camellia sells inventory within the United States and abroad.Camellia conducted all of the research related to the inventory within the United States.Gross sales of the inventory were $20,000,000,of which $12,000,000 was from foreign source sales.Gross profit from sale of the inventory was $8,000,000,of which $2,000,000 was from foreign source sales.What is the minimum amount of R&E expense that can be apportioned to the company's foreign source income for foreign tax credit purposes,assuming this is the first year the company makes this computation?

Question

Quizplus · Accepted Answer

The minimum amount of R&E expense that can be apportioned to the company's foreign source income for foreign tax credit purposes is $112,500. This is calculated by multiplying the total R&E expense of $600,000 by the ratio of foreign source gross sales to total gross sales, which is $12,000,000/$20,000,000 = 60%.