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 $1.35 Determine the amount (in U.S. dollars) of U.S. taxable income, U.S. foreign tax credit, and U.S. tax liability related to the foreign branch.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter16: Multijurisdictional Taxation
Section: Chapter Questions
Problem 19P
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Royal Company (a U.S. based company) has foreign branch in Great Britain. The foreign branch generates £5,000,000 pretax income. October 15, branch sends £1,000,000 to Royal. Income tax rate in Great Britain is 15%. Taxes are paid to Great Britain’s government on December 31. Assume a tax rate of 21% in the U.S.
Here are relevant exchange rates:
US$ 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.
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