FC, a foreign corporation, has $100,000 of interest expense allocated to effectively connected income from a US trade or business for Year 1 on obligations of maturities of more than 1 year. Its interest expense payments consist of $55,000 of interest to N, a non-resident individual not engaged in a US trade or business; $25,000 interest to C Corporation, a foreign corporation owning 15 percent of FC’s voting stock, and $20,000 to D Corporation, a Delaware corporation. Which of the following is true:

Whether or not D Corporation is taxed on the interest depends upon the classification of the obligor as domestic or foreign.

C Corporation is subject to tax on the interest at 30 percent.

N is subject to tax on the interest at 30 percent.,

FC is a foreign corporation, and none of the interest is subject to withholding.

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