Assume that two different U . S . - based companies have foreign branches. Alpha Company has
Question:
Assume that two different USbased companies have foreign branches. Alpha Company has a branch in Country A and Zeta Company has a branch in Country Z The amount of income before tax earned by each foreign branch and the amount of income tax paid to the local government is as follows:
Alpha Company Branch in A Zeta Company Branch in Z
Income before taxes $ $
Income taxes paid $ $
Both Alpha and Zeta will report $ of foreign branch income on their US tax return. The corporate tax rate in the US is
a Calculate the net US tax liability for both Alpha and Zeta.
b Explain what happens to the difference in foreign taxes paid by Zeta, and the FTC allowed by the US
c Now assume that both foreign branches belong to the same parent, Alpha Company, a US company. Calculate Alphas net US tax liability.
d Why is the net US tax liability different in subpart c above, than when calculated in subpart a above?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill