Question

Santa Fe Corporation manufactured inventory in the United States and sold the inventory to customers in Mexico. Gross profit from the sale of the inventory was $247,000. Title to the inventory passed FOB: shipping point. How much of the gross profit is treated as foreign source income for purposes of computing the corporation's foreign tax credit in the current year

Answer 1

Answer: $0

Step-by-step explanation:

FOB Shipping point means that the title passes to the buyers at the shipping point which in this case is the United States, the sale can be said to have occurred in the United States.

There will therefore be no foreign trade tax credit because the income from this transaction will be treated as having been earned in the United States (U.S. source income).