Freon Corporation, a U.S. corporation, manufactures air-conditioning and warm air heating equipment. Freon reported gross sales from this product group of $50,000,000, of which $10,000,000 were foreign source. The gross profit percentage for domestic sales was 15%, and the gross profit percentage from non-U.S. sales was 20%. Freon incurred R&E expenses of $6,000,000, all of which were conducted in the United States.

a. What amount of the R&E expense will be apportioned to foreign source income under the sales method?

b. What amount of the R&E expense will be apportioned to foreign source income under the gross income method?

c. If Freon wants to maximize its foreign tax credit limitation, which method produces the better outcome?