International Multifoods Corporation v. Commissioner
United States Tax Court
108 T.C. 25 (1997)
- Written by David Bloom, JD
Facts
International Multifoods Corporation (IMC) (plaintiff), a United States resident, franchised donut shops in the United States and other countries. IMC sold its Asian and Pacific franchise operations and intangible assets, including trademarks and goodwill that IMC developed in the Asian and Pacific regions, to another company (Duskin). IMC tried to limit its tax liability from the sale by deeming all intangible assets sold as foreign goodwill. IMC thereby claimed on IMC’s tax return that the income derived from the sale was strictly foreign-source income. All of the foreign goodwill sold to Duskin was developed because of IMC’s favorable franchise rights and trademarks, which were not limited to the Asian and Pacific regions. The Internal Revenue Service (IRS) (defendant) determined that the foreign goodwill was an integral part of the overall intangible property that IMC sold to Duskin and was, therefore, sourced as United States income rather than foreign-source income. IMC filed a petition for judicial review of the IRS’s determination.
Rule of Law
Issue
Holding and Reasoning (Ruwe, J.)
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