Comprehensive Foreign Tax Credit Example 2007

Comprehensive Foreign Tax Credit Example 2007 - Assume that...

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International Taxation Comprehensive Foreign Tax Credit Case Blight Corporation has a branch in Europe. For Years 1 -3, Blight reported the following domestic and foreign-source income and European taxes paid: YEAR 1 YEAR 2 YEAR 3 U.S.-source Foreign-source 1,400,000 350,000 1,100,000 500,000 900,000 750,000 General limitation income U.S.-source Foreign-source 2,600,000 (950,000) 2,750,000 150,000 2,100,000 1,000,000
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Unformatted text preview: Assume that the European country in which Blight operates imposes a 10% tax on investment income and a 40% tax on general limitation income. Further assume that the U.S. imposes a flat rate of 34% on all Blight’s income. Compute Blight’s U.S. taxable income, its pre-credit U.S. income tax, and its allowable foreign tax credit for each of the three years. See Code Sections 904(f)(5)(C) and 904(f)(1):...
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