International Taxation: US source vs. foreign source

1. USAco loans $100,000 to Toni, a U.S. citizen and resident. Interest of $10,000 is payable annually on December 31 of each year. Toni is physically present in Mexico on December 31, 2009 when he pays the interest. The interest income is:
(a) U.S. source because USAco is a domestic corporation.
(b) U.S. source because Toni is a U.S. resident.
(c) sourced under the 50-50 method.
(d) foreign source because Toni is physically present in Mexico on December 31
when the interest is paid.

2. FORco pays a dividend from a U.S. bank account to Sam, a U.S. citizen who resides in the U.S. The dividend is:
(a) foreign source because the payer is a foreign corporation.
(b) U.S. source because the payment is made in the U.S.
(c) U.S. source because the recipient is a U.S. citizen.
(d) foreign source because the money was earned in foreign country F.

3. USAco purchases merchandise in the U.S. that it resells in Canada. Title passes in Canada. The gross profi ts from these sales are:
(a) foreign source because title passes in Canada.
(b) U.S. source because the seller is a domestic corporation.
(c) U.S. source because the merchandise was purchased in the U.S.
(d) sourced under the 50-50 method.

4. USAco manufactures merchandise in the U.S. that it then sells in Canada. Title passes in Canada. The gross profit from these sales is:
(a) foreign source because title passes in Canada.
(b) U.S. source because the seller is a domestic corporation.
(c) U.S. source because the merchandise was manufactured in the U.S.
(d) sourced under the 50-50 method.