1. Engco a domestic corporation produces industrial engines atits U.S. plant for

1. Engco a domestic corporation produces industrial engines atits U.S. plant for sale in the United States and Canada. Engco alsohas a plant in Canada that performs the final stages of productionwith respect to the engines sold in Canada. All of the output ofthe Canadian plant is sold in Canada whereas only one-third of theoutput of the U.S. plant is shipped to Canada. The Canadianoperation is classifi ed as a branch for U.S. tax purposes. Duringthe current year Engco%u2019s total sales to Canadian customerswere $10 million and the related cost of goods sold is $7 million.The average value of property plant and equipment is $30 millionat the U.S. plant and $5 million at the Canadian plant. Engcosells all goods with title passing at the Canadian plant in thecase of Canadian sales and at the U.S. plant in the case of U.S.sales.