Austin Corporation, a U.S. corporation, received the following investment income during 2014: $50,000 of dividend income from ownership of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its 50-percent owned Irish venture, and $30,000 capital gain from sale of its stock in a Brazilian corporation. How much foreign source income does Austin have in 2014?

Question

Quizplus · Accepted Answer

Austin Corporation has foreign source income of $110,000, calculated as follows:
- $50,000 dividend income from a French corporation is foreign source income.
- $20,000 interest income from a loan to a Dutch subsidiary is foreign source income.
- $20,000 royalty income from a 50% owned Irish venture is foreign source income ($40,000 x 50%).
- The $30,000 capital gain from the sale of stock in a Brazilian corporation is not foreign source income, as it is derived from the sale of the stock rather than from the underlying assets or activities of the corporation.