Qwan, a U. S. corporation, reports $250,000 interest expense for the tax year. None of the interest relates to nonrecourse debt or loans from affiliated corporations. Qwan's U. S. and foreign assets are reported as follows. Fair market value: U. S. assets $ 5,000,000 Foreign assets $10,000,000 Tax book value: U. S. assets $ 2,000,000 Foreign assets $ 6,000,000 How should Qwan assign its interest expense between U. S. and foreign sources to maximize its FTC for the current year?

Question

Melissa Kline

Business

27 December, 21:22

Qwan, a U. S. corporation, reports $250,000 interest expense for the tax year. None of the interest relates to nonrecourse debt or loans from affiliated corporations. Qwan's U. S. and foreign assets are reported as follows. Fair market value: U. S. assets $ 5,000,000 Foreign assets $10,000,000 Tax book value: U. S. assets $ 2,000,000 Foreign assets $ 6,000,000 How should Qwan assign its interest expense between U. S. and foreign sources to maximize its FTC for the current year?

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Reagan Lynn · Answer 1

They have to use fair value or tax book value of the assets the method that is used should be the largest FTC 250,000

Explanation:

(5,000,000 / (5,000,00+10,000,000) = 83,333 interest expense allocated 250,000-83,333=166,667