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%u2019s financial statements appear as follows:
- BALANCE SHEET
- Assets Liabilities & Owners%u2019 Equity
- Cash $100
- Receivables $500
- Notes Payable $400
- Owner%u2019s 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?