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USAco, a domestic corporation, loans $100,000 to Toni, a U.S. citizen and resi-
dent. Interest of $10,000 is payable annually on December 31 of each year. Toni is
physically present in Mexico on December 31, 20Y2 when he pays the interest.
The interest income is:
(a) U.S.-source because USAco is a domestic corporation.
(b) U.S.-source because Toni is a U.S. resident.
(c) sourced under the 50-50 method.
(d) foreign-source because Toni is physically present in Mexico on December 31
when the interest is paid.

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