Beatco, an accrual basis domestic corporation, manufactures musical instruments for sale both in the United States and abroad. Beatco's functional currency is the U.S. dollar. Two years ago, Beatco established a branch sales office in Switzerland. The sales office is a qualified business unit with the Swiss franc (CHF) as its functional currency. In Year 1, the branch had CHF40 million of taxable income, and paid CHF 15 million of Swiss income taxes. The Swiss franc had an average exchange rate in Year 1 of CHF1 equals $1.10.

What are the U.S. tax consequences of the branch's activities in Year 1?