During the current year,USACo (a domestic corporation) sold equipment to FrenchCo,a foreign corporation,for $350,000,with title passing to the buyer in France.USACo purchased the equipment several years ago for $100,000 and took $80,000 of depreciation deductions on the equipment,all of which were allocated to U.S.-source income.USACo's adjusted basis in the equipment is $20,000 on the date of sale.What is the source of the $330,000 gain on the sale of this equipment?

Question

Quizplus · Accepted Answer

The gain on the sale of the equipment is $330,000 ($350,000 sale price - $20,000 adjusted basis). Of this amount, $80,000 is U.S.-source income, which represents the amount of depreciation deductions that were previously taken on the equipment and allocated to U.S.-source income. The remaining $250,000 is foreign source income, as the sale took place outside of the United States and the buyer is a foreign corporation. Therefore, the correct answer is C, as it reflects both sources of income.

During the Current Year,USACo (A Domestic Corporation) Sold Equipment to FrenchCo,a