Which of the Following Statements Regarding the Sourcing of Gross

question 39

Multiple Choice

Which of the following statements regarding the sourcing of gross income is true?

• A) All else equal, a U.S. corporation prefers that more of its U.S. taxable income be characterized as foreign source, to increase its foreign tax credit limitation.
• B) All else equal, a U.S. corporation prefers that less of its U.S. taxable income be characterized as foreign-source, to increase its foreign tax credit limitation.
• C) All trade or business income earned by a U.S. corporation is treated as U.S.-source income.
• D) All investment income earned by a U.S. corporation is treated as U.S.-source income.

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Definitions:

Return on Sales Ratio

A financial ratio that measures the efficiency of a company in generating operating profit from its revenue.

Net Sales

The revenue a company earns from sales after subtracting the costs of returns, allowances for any damaged or missing items, and discounts.

Net Income Before Taxes

The total earnings of a company before taxes have been deducted.

Gross Profit

The difference between revenues and the cost of goods sold before deducting overheads, taxes, interest, and depreciation.