Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $200,000. Title to the inventory passed FOB: shipping point. Under the 50/50 method, how much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year?

Question

Quizplus · Accepted Answer

Under §863(b), 50 percent of the gross income is sourced based on where the assets producing the inventory are located and 50 percent is sourced based on title passage. Because title passes in the United States and the assets are located in the United States, 100 percent of the gross profit is treated as U.S. source income for FTC purposes.

Santa Fe Corporation Manufactured Inventory in the United States and Sold