Qwan, a US ? How Should Qwan Assign Its Interest Expense Between U

question 72

Multiple Choice

Qwan, a U.S.corporation, reports $250,000 interest expense for the tax year.None of the interest relates to nonrecourse debt or loans from affiliated corporations.Qwan's U.S.and foreign assets are reported as follows. $$\begin{array}{l}\text { Fair market value }\\\begin{array} { l l } \text { U.S. assets } & \$ 5,000,000 \\\text { Foreign assets } & \$ 10,000,000 \\\text { Tax book value: } & \\\text { U.S. assets } & \$ 2,000,000 \\\text { Foreign assets } & \$ 6,000,000\end{array}\end{array}$$ ? How should Qwan assign its interest expense between U.S.and foreign sources to maximize its FTC for the current year?

• A)Using tax book values.
• B)Using tax book value for U.S.source and fair market value for foreign source.
• C)Using fair market values.
• D)Using fair market value for U.S.source and tax book value for foreign source.

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