During 2016, Martina, an NRA, receives interest income of $50,000 from Collins,
ID: 1175908 • Letter: D
Question
During 2016, Martina, an NRA, receives interest income of $50,000 from Collins, Inc., an unrelated U.S. corporation. Considering the following facts related to Collins’ operations, what is the source of the interest income received by Martina, US or Foreign? Show all computations.
U.S.-source
Active foreign
Total gross
Year
income
business income
income
2012
$300,000
$400,000
$ 700,000
2013
250,000
750,000
1,000,000
2014
200,000
800,000
1,000,000
2015
250,000
850,000
1,100,000
U.S.-source
Active foreign
Total gross
Year
income
business income
income
2012
$300,000
$400,000
$ 700,000
2013
250,000
750,000
1,000,000
2014
200,000
800,000
1,000,000
2015
250,000
850,000
1,100,000
Explanation / Answer
US source Active foreign Year Income Business income 2013 250000 750000 1000000 2014 200000 800000 1000000 2015 250000 850000 1100000 700000 2400000 3100000 0.774194 Collins, Inc immediately preceding 3 yrs ratio to total income = 2400000/3100000 77.42% Since the foreign income ratio is less than 80% of the gross income of the company, the source of income is the US source
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