International Multifoods Corporation and Affiliated Companies - Page 19

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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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