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Unformatted text preview: [b] Compute Lincolns net U.S. tax liability from their foreign branch operations if they take a deduction for foreign taxes paid. Note: In both cases assume that Lincolns other U.S. source-income puts them in the 35% tax bracket. Deduction Credit Foreign source income $100,000 $100,000 Less: Deduction for all foreign taxes paid (45,000) Increase in U.S. taxable income 55,000 $100,000 X tax rate X 35% X 35% U.S. income tax before FTC 19,250 35,000 Less: Foreign tax credit 0 (30,000) Net increase in U.S. tax liability $19,250 $5,000...
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- Fall '08