Tax treaty exempts interest payments from withholding taxes

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Reference no: EM13751919

USAco, a domestic corporation, is the wholly-owned U.S. subsidiary of FORco, a foreign corporation. The U.S.-Country F tax treaty exempts interest payments from withholding taxes. USAco’s financial statements appear as follows:

BALANCE SHEET

Assets Liabilities & Owners’ Equity Cash $100

Receivables $500 Notes Payable $400

Owner’s Equity $200

INCOME STATEMENT

Gross Income $500

Administrative Expenses $350

Interest Expense $100 The interest expense of $100 arises from a notes payable from USAco to FORco.

What is the maximum amount of interest USAco may deduct on its U.S. return?

Reference no: EM13751919

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