Royal Company (a U.S. based company) has foreign branch in Great Britain. The foreign branch generates £5,000,000 pretax income. October 15, branch sends £1,000,000 to Royal. Income tax rate in Great Britain is 15%. Taxes are paid to Great Britain’s government on December 31. Assume a tax rate of 21% in the U.S. Here are relevant exchange rates: US$ to £ 1/1 $1.2 10/15 $1.3 12/31 $1.4 Average $1.35 Determine the amount (in U.S. dollars) of U.S. taxable income, U.S. foreign tax credit, and U.S. tax liability related to the foreign branch.

Royal Company (a U.S. based company) has foreign branch in Great Britain. The foreign branch generates £5,000,000 pretax income. October 15, branch sends £1,000,000 to Royal. Income tax rate in Great Britain is 15%. Taxes are paid to Great Britain’s government on December 31. Assume a tax rate of 21% in the U.S. Here are relevant exchange rates: US$ to £ 1/1 $1.2 10/15 $1.3 12/31 $1.4 Average $1.35 Determine the amount (in U.S. dollars) of U.S. taxable income, U.S. foreign tax credit, and U.S. tax liability related to the foreign branch.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter16: Multijurisdictional Taxation

Section: Chapter Questions

Problem 19P

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