ForCo,a foreign corporation,receives interest income of $100,000 from USCo,an unrelated domestic corporation.USCo has historically earned 82% of its income from foreign sources.What amount of ForCo's interest income is U.S.source?

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Interest income generally is sourced based on the residence of the payor.[§ 861(a)(1)] However,an exception exists when a U.S.payor meets the 80% foreign business requirement of § 861(a)(1)(A).If this test is met,the interest paid by a U.S.corporation is treated as foreign source.This test is not met in this case; thus,all of the interest is foreign source.An exception also exists for interest received on deposits with foreign branches of U.S.banks.[§ 861(a)(1)(B)]

ForCo,a Foreign Corporation,receives Interest Income of $100,000 from USCo,an Unrelated