credit_vs_deduction - Required: [a] Compute Lincolns net...

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Topic: Foreign tax credit vs. tax deduction Lincoln Corporation operates a foreign branch (not a separate legal entity) in Africa. The foreign branch earns income before taxes of $100,000. Income taxes paid to the foreign government are $30,000 (30 percent) and sales and other taxes paid to the foreign government are $15,000. Lincoln must include the $1000,000 of foreign branch income in its U.S. tax return in calculating its U.S. taxable income.
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Unformatted text preview: Required: [a] Compute Lincolns net U.S. tax liability from their foreign branch operations if they take a credit for foreign taxes paid. [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....
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