4. Wheelco, a foreign corporation, manufactures motorcycles for sale worldwide. Wheelco markets its motorcycles in the United States through Wheely, a wholly-owned U.S. marketing subsidiary that derives all of its income from U.S. business operations. Wheelco also has a creditor interest in Wheely, such that Wheely’s debt to equity ratio is 3 to 1, and Wheely makes annual interest payments of $60 million to Wheelco. The results from Wheely’s first year of operations are as follows: Sales ............................................................................................. $180 million Interest income ............................................................................... $6 million Interest expense (paid to Wheelco)................................................................................................. $6 million Depreciation expense....................................... .............................. ($30 million) Other operating expenses................................. .............................. ($81 million) Pre-tax income ................................................. ............................ $15 million Assume the U.S. corporate tax rate is 35%, and that the applicable tax treaty exempts Wheelco’s interest income from U.S. withholding tax. Compute Wheely’s interest expense deduction. 5. 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’s financial statements appear as follows: BALANCE SHEET Assets Liabilities & Owners’ Equity Cash $100 Receivables $500 Notes Payable $400 Owner’s 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?