LO.3 Create, Inc., produces inventory in its foreign manufacturing plants for sale in the United States. Its foreign manufacturing assets have a tax book value of $5 million and a fair market value of $15 million. Its assets related to the sales activity have a tax book value of $2 million and a fair market value of $5 million. Create’s interest expense totaled $400,000 for the current year.

a. What amount of Create’s interest expense is allocated and apportioned to foreignsource income using the tax book value method? Using the fair market method?

b. If Create wants to maximize its FTC, which method should it use?