FC (which is not a CFC) is a country X corporation that actively conducts a non-real estate
Question:
FC (which is not a CFC) is a country X corporation that actively conducts a non-real estate trade or business through a branch, B, in the US. For the current taxable year, FC's balance sheet is as follows (assume amounts are in US dollars and computed in accordance with the regs):
AB FMV
Asset 1 1,000 $2,500
Asset 2 7,500 $7,500
Amount Interest Expense
Liability 1 $ 800 56
Liability 2 $3,200 256
(000,000's omitted)
FC has $200 of gross income of which $120 is ECI (000,000's omitted) and $80 is non-ECI. It has no other expenses except for the interest.
Asset 1 is a US asset producing income (the $120) that is entirely ECI to FC. Asset 2 is an asset in X that produces income ($80). Liabilities 1 and 2 are loans that bear interest at the rates of 7% and 8%, respectively. Liability 1 is a booked liability of B, and Liability 2 is booked in X's home country. What is FC’s maximum interest expense deduction for the taxable year?
Expert Answer:
If the income pertains to the year 2018 or prior years then 30 million interest is allowedpermitted ... View the full answer
