Interest paid to an unrelated party by a domestic corporation that historically earns 81% of its gross income each year from the conduct of an active trade or business outside the United States is foreign-source income.

Question

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According to the IRS regulations, interest paid to an unrelated party by a domestic corporation that earns at least 80% of its gross income each year from the conduct of an active trade or business outside the United States is considered foreign-source income. Therefore, since the corporation earns 81% of its gross income from an active trade or business outside the US, the interest paid to an unrelated party is foreign-source income.

Interest Paid to an Unrelated Party by a Domestic Corporation