Question
A U.S. corporation sells its products in the United States and Europe. During the current year, selling, general, and administrative (SG&A) expenses add up to
A U.S. corporation sells its products in the United States and Europe. During the current year, selling, general, and administrative (SG&A) expenses add up to $2,000.
The corporation had $12,000 in gross sales to U.S. customers and $3,000 to European customers. Gross income (sales minus cost of goods sold) from domestic sales was $3,000, and $1,000 from foreign sales.
1. What amount of the SG&A expenses are allocated to domestic (US) and foreign source income using the following methods:
Gross Sales Method
Gross Income Method
2. Which method maximizes its foreign tax credit limitation? Assume the FDII deduction does not apply.
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