Part A Albright Company derived the following items of income in 2018. Indicate whether the items...

Part A

Albright Company derived the following items of income in 2018. Indicate whether the items will be sourced as U.S. or foreign:

Albright receives interest on a bank account it has with Deutschebank in Bonn, Germany.

Albright receives royalties on a patent it leases to an Irish Company. The patent was previously developed by Albright with respect to a business it discontinued many years ago.

Albright sells baby car seats manufactured at its plant in Tennessee to a customer in Buenos Aires, Argentina. Albright delivers the goods to its customers warehouse in Buenos Aires.

Part B

Albright generates $900,000 of interest expense in 2018. Explain how the interest expense will be allocated as an expense against U.S. and foreign source income. What alternative(s) are available?

Explain generally how Albright will allocate support and stewardship expenses between U.S. and foreign sources.

Solutions

Expert Solution

Answer for part A

interest income from bank account in germany is treated as sourced in foreign

ANY ROYALTIES received by the company when other parties use your parents even though it is abroad included in assessable income. Hence Albright company who received royalties from a Irish company regards usage of their patents will be sourced in US.

In case of main place of business situated in US any transactions happened internationally will be treated as US income &included in assessable income. Hence in this case Albright company manufactures baby car seats in US sells them to a party in Argentina will be treated as source of income in US

Answer to part B

Allocation of expenses btw US & foreign

Expenses in general allocated in groups based on operations done in each activity. These can be allocated based on usage of the same. We can allocate all interest expenses in appropriate proportion to income from US & foreign income.expense allocation should be done in a fair way.

ekkarill92 answered 1 year ago

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