What amount of interest expense is allocated

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Question - Create, Inc., produces inventory in its foreign manufacturing plants for sale in the United States. Its foreign manufacturing assets have a tax book value of $5 million and a fair market value of $15 million. Its assets related to the sales activity have a tax book value of $200,000 and a fair market value of $50,000. Create's interest expense totaled $300,000 for the current year.

a. What amount of interest expense is allocated and aportioned to foreign-source income using the tax book value method? What amount of Create's interest expense is allocated and apportioned to foreign-source income using the fair market method?

b. If Create wishes to maximize its FTC, which method should it use?

Reference no: EM131820488

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