Which of the following statements regarding the sourcing of gross income is true?

Question

Quizplus · Accepted Answer

A U.S. corporation prefer that more of its U.S. taxable income be characterized as foreign source, to increase its foreign tax credit limitation. This is because the foreign tax credit is limited to the amount of U.S. tax liability on foreign source income, so if more income is characterized as foreign source, the corporation can potentially increase the amount of foreign taxes that can be credited against its U.S. tax liability. Therefore, option A is the correct answer. Option B is incorrect because it is the opposite of what a U.S. corporation would prefer. Option C is incorrect because not all trade or business income earned by a U.S. corporation is treated as U.S.-source income. Option D is also incorrect because not all investment income earned by a U.S. corporation is treated as U.S.-source income.

Which of the Following Statements Regarding the Sourcing of Gross