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computing petitioner's foreign tax credit limitation under
section 904(a).
We begin with the sourcing of income rules under section
865. Section 865(a)(1) provides that income from the sale of
personal property by a U.S. resident14 is generally sourced in
the United States. Section 865(d) provides that in the case of
any sale of an intangible, the general rule applies only to the
extent that the payments in consideration of such sale are not
contingent on the productivity, use, or disposition of the
intangible. Sec. 865(d)(1)(A). Section 865(d)(2) defines
"intangible" to mean any patent, copyright, secret process or
formula, goodwill, trademark, trade brand, franchise, or other
like property. Section 865(d)(3) carves out a special sourcing
rule for goodwill. Payments received in consideration of the
sale of goodwill are treated as received from sources in the
country in which the goodwill was generated.
1. Goodwill
Petitioner allocated $1,110,000 of the sale price to
goodwill. On brief, petitioner maintains that the franchisor's
interest it conveyed to Duskin consisted exclusively of
intangible assets in the nature of goodwill; i.e., franchises,
trademarks, and the Mister Donut System. Petitioner contends
14Sec. 865(g)(1)(A)(ii) defines "United States resident" to
include a domestic corporation. See sec. 7701(a)(30).
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