Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is:
The question where an income is earned is always a matter of doubt when the business is begun in one country and ended in another.
Barclay & Co. v. Edwards, 267 U.S. 442 (1924).
In this case, the Supreme Court held that it was not unconstitutional to levy a tax on domestic corporations which manufactured in the U.S. and sold abroad, whereas foreign corporations which similarly manufactured and sold would not be taxed. This exemption for foreign corporations manufacturing in the U.S. and selling abroad no longer applies. Under current law, the income must be allocated between the production activity and the sales activity. See Treas. Reg. §1.863-3(b).