Wheelco, a foreign corporation, manufactures motorcycles for sale worldwide. Wheelco markets

its motorcycles in the United States through Wheely, a wholly-owned U.S. marketing subsidiary

that derives all of its income from its U.S. sales operation. Wheelco also has a creditor interest in

Wheely, such that Wheely makes annual interest payments of $60 million to Wheelco.

The results from Wheely's first year of operations are as follows:

Gross profits................................. $175 million

Interest expense (paid to Wheelco).... $(60 million)

Depreciation expense..................... $(30 million)

Other operating expenses................ $(85 million)

Net income.................................... $0 million

Assume that the applicable tax treaty exempts Wheelco's interest income from U.S. withholding tax.

Compute Wheely's interest expense deduction.