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:

Disclosed Principal

A principal whose identity is known to the third party at the time a contract is entered into by the agent on behalf of the principal.

Partially Disclosed Principal

A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract.

Nonperformance

The failure to fulfill a contractual obligation or carry out an agreement as specified.

Combust

The process of burning or igniting a substance, resulting in light, heat, and often combustion products like gases or ash.