Pursco is a domestic corporation that distributes scientific equipment worldwide. During the current year Pursco had $100 million of sales a gross
profit of $40 million and incurred $30 million of selling general and administrative expenses (SG&A) for taxable income of $10 million.
Pursco%u2019s sales include $20 million of sales to foreign customers. The gross profit on these foreign sales was $10 million. Pursco transferred
title abroad on all foreign sales and therefore the entire $10 million is classified as foreign-source income. A time management survey was recently
completed and indicates that employees devote 90% of their time to the company%u2019s domestic operations and 10% to foreign operations. Compensation
expenses account for $20 million of the $30 million of total SG&A expenses. Assume Pursco%u2019s $10 million of taxable income is subject to U.S.
tax at a 35% rate.

Compute Pursco%u2019s foreign tax credit limitation under the following independent assumptions.

Pursco determines the amount of SG&A expenses allocable to foreign-source income using gross sales as an apportionment base.

Pursco determines the amount of SG&A expenses allocable to foreign-source income using gross profi t as an apportionment base.

Pursco determines the amount of SG&A expenses allocable to foreign-source income using time as an apportionment base for the compensation
component of SG&A and gross sales as an apportionment base for the all other SG&A expenses.