Euro Corporation, a U.S. corporation, operates through a branch in Germany. During 2021, the branch reported taxable income of $1,100,000 and paid German income taxes of $330,000. In addition, Euro received $54,000 of dividends from its 5 percent investment in the stock of Maple Leaf Company, a Canadian corporation. The dividend was subject to a withholding tax of $5,400. Euro reported U.S. taxable income from its manufacturing operations of $1,046,000. Total taxable income was $2,200,000. Pre-credit U.S. taxes on the taxable income were $462,000. Included in the computation of Euros taxable income were definitely allocable expenses of $550,000, 50 percent of which were related to the German branch taxable income. Complete pages 1 and 2 of Form 1118 for just the foreign branch income reported by Euro.
Page 1 of Form 1118. Form 1118 (Rev. December 2020) Department of the Treasury Internal Revenue Service Foreign Tax Credit-Corporations Attach to the corporation's tax return. Go to www.irs.gov/Form 1118 for instructions and the latest information. or other tax year 20 and ending beginning OMB No. 1545- 0123 For calendar year 20 Name of corporation Employer identification number Use a separate Form 1118 for each applicable category of income (see instructions). a Separate Category (Enter code-see instructions.) b If code 901 is entered on line a, enter the country code for the sanctioned country (see instructions) If one of the RBT codes is entered on line a, enter the country code for the treaty country (see instructions) Schedule A Income or (Loss) Before Adjustments (Report all amounts in U.S. dollars. See Specific Instructions.) 2. Foreign Country or U.S. Gross Income or (Loss) From Sources Outside the United States Possession 1. EIN or Reference ID (enter two-letter code-use a 3. Inclusions Under Sections 951(a)(1) Number (see separate line for and 951A (see instructions) 4. Dividends (see instructions) instructions) (see (a) Exclude (b) Gross-Up (section instructions) Gross-Up (a) Exclude Gross-Up 78) (b) Gross-Up (section 78) A B 5. Interest each) Totals (add lines A through C) 6. Gross Rents, Royalties, and License Fees 7. Sales 8. Gross Income From Performance of Services 9. Section 986(c) Gain 10. Section 987 Gain 11. Section 988 Gain 12. Other (attach schedule) B Totals 14. Allocable Deductions Rental, Royalty, and Licensing Expenses 13. Total (add columns 3(a) through 12) (a) Dividends Received Deduction (see instructions) (b) Deduction Allowed Under Section 250(a) (1)(A)-Foreign Derived Intangible Income (c) Deduction Allowed Under Section 250(a)(1) (B)Global Intangible Low-Taxed Income (d) Depreciation, Depletion, and Amortization (f) Expenses Allocable to Sales Income (e) Other Allocable Expenses 1,375,000 A B C Totals (i) Total 14. Allocable Deductions (continued) (h) Other (g) Expenses Allocable to Allocable 15. Apportioned Share Deductions Allocable of Deductions (enter Gross Income From (attach Deductions (add amount from applicable Performance of schedule) columns 14(a) line of Schedule H, Part Services (see through 14(h)) II, column (d)) instructions) 16. Net Operating Loss Deduction 17. Total Deductions (add columns 14(i) through 16) 18. Total Income or (Loss) Before Adjustments (subtract column 17 from column 13) B Totals *For section 863(b) income, NOLs, income from RICs, high-taxed income, section 965, section 951A, and reattribution of income by reason of disregarded payments, use a single line (see instructions). Also, for reporting branches that are QBUs, use a separate line for each such Form 1118 (Rev. Cat. No. 10900F branch. 12-2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. Page 2 of Form 1118. Form 1118 (Rev. 12-2020) Page 2 Schedule B Foreign Tax Credit (Report all foreign tax amounts in U.S. dollars.) Part I--Foreign Taxes Paid, Accrued, and Deemed Paid (see instructions) 1. Credit Is Claimed for Taxes (check 2. Foreign Taxes Paid or Accrued (attach schedule showing amounts in foreign currency and conversion rate(s) used) one): Paid Accrued Tax Withheld at Source on: (b) Distributions of (e) Rents, Date Paid (c) Branch Date Accrued (a) Dividends Previously Taxed Remittances (d) Interest Royalties, and (1) Other Income License Fees A B Totals (add lines A through C) 2. Foreign Taxes Paid or Accrued (attach schedule showing amounts in foreign currency and conversion rate(s) used) Other Foreign Taxes Paid or Accrued on: () Total Foreign Taxes Paid or Accrued (9) Sales (h) Services Income (i) Other (add columns 2(a) through 20) A B 3. Tax Deemed Paid (see instructions) Totals Part Separate Foreign Tax Credit (Complete a separate Part II for each applicable category of income.) 1a Total foreign taxes paid or accrued (total from Part I, column 2()) b Foreign taxes paid or accrued by the corporation during prior tax years that were suspended due to the rules of section 909 and for which the related income is taken into account by the corporation during the current tax year (see instructions) 2 Total taxes deemed paid (total from Part I, column 3) 3 Reductions of taxes paid, accrued, or deemed paid (enter total from Schedule G) 4 5 6 Taxes reclassified under high-tax kickout Enter the sum of any carryover of foreign taxes (from Schedule K, line 3, column (xiv), and from Schedule 1, Part III, line 3 carrybacks to the current tax year Total foreign taxes (combine lines 1a through 5) Enter the amount from the applicable column of Schedule J, Part I, line 11 (see instructions). If Schedule J is not required to be completed, enter the result from the Totals line of column 18 of the applicable Schedule A Total taxable income from all sources (enter taxable income from the corporation's tax return) Adjustments to line 8a (see instructions) 7 8 b Subtract line 8b from line 8a 9 Divide line 7 by line 8c. Enter the resulting fraction as a decimal (see instructions). If line 7 is greater than line 8c, enter 1 Total U.S. income tax against which credit is allowed (regular tax liability (see section 26(b)) minus any American Samoa economic 10 development credit) 11 Multiply line 9 by line 10 12 Increase in limitation (section 960(c)). Form 1118 (Rev. 12-2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. Page 1 of Form 1118. Form 1118 (Rev. December 2020) Department of the Treasury Internal Revenue Service Foreign Tax Credit-Corporations Attach to the corporation's tax return. Go to www.irs.gov/Form 1118 for instructions and the latest information. or other tax year 20 and ending beginning OMB No. 1545- 0123 For calendar year 20 Name of corporation Employer identification number Use a separate Form 1118 for each applicable category of income (see instructions). a Separate Category (Enter code-see instructions.) b If code 901 is entered on line a, enter the country code for the sanctioned country (see instructions) If one of the RBT codes is entered on line a, enter the country code for the treaty country (see instructions) Schedule A Income or (Loss) Before Adjustments (Report all amounts in U.S. dollars. See Specific Instructions.) 2. Foreign Country or U.S. Gross Income or (Loss) From Sources Outside the United States Possession 1. EIN or Reference ID (enter two-letter code-use a 3. Inclusions Under Sections 951(a)(1) Number (see separate line for and 951A (see instructions) 4. Dividends (see instructions) instructions) (see (a) Exclude (b) Gross-Up (section instructions) Gross-Up (a) Exclude Gross-Up 78) (b) Gross-Up (section 78) A B 5. Interest each) Totals (add lines A through C) 6. Gross Rents, Royalties, and License Fees 7. Sales 8. Gross Income From Performance of Services 9. Section 986(c) Gain 10. Section 987 Gain 11. Section 988 Gain 12. Other (attach schedule) B Totals 14. Allocable Deductions Rental, Royalty, and Licensing Expenses 13. Total (add columns 3(a) through 12) (a) Dividends Received Deduction (see instructions) (b) Deduction Allowed Under Section 250(a) (1)(A)-Foreign Derived Intangible Income (c) Deduction Allowed Under Section 250(a)(1) (B)Global Intangible Low-Taxed Income (d) Depreciation, Depletion, and Amortization (f) Expenses Allocable to Sales Income (e) Other Allocable Expenses 1,375,000 A B C Totals (i) Total 14. Allocable Deductions (continued) (h) Other (g) Expenses Allocable to Allocable 15. Apportioned Share Deductions Allocable of Deductions (enter Gross Income From (attach Deductions (add amount from applicable Performance of schedule) columns 14(a) line of Schedule H, Part Services (see through 14(h)) II, column (d)) instructions) 16. Net Operating Loss Deduction 17. Total Deductions (add columns 14(i) through 16) 18. Total Income or (Loss) Before Adjustments (subtract column 17 from column 13) B Totals *For section 863(b) income, NOLs, income from RICs, high-taxed income, section 965, section 951A, and reattribution of income by reason of disregarded payments, use a single line (see instructions). Also, for reporting branches that are QBUs, use a separate line for each such Form 1118 (Rev. Cat. No. 10900F branch. 12-2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education. Page 2 of Form 1118. Form 1118 (Rev. 12-2020) Page 2 Schedule B Foreign Tax Credit (Report all foreign tax amounts in U.S. dollars.) Part I--Foreign Taxes Paid, Accrued, and Deemed Paid (see instructions) 1. Credit Is Claimed for Taxes (check 2. Foreign Taxes Paid or Accrued (attach schedule showing amounts in foreign currency and conversion rate(s) used) one): Paid Accrued Tax Withheld at Source on: (b) Distributions of (e) Rents, Date Paid (c) Branch Date Accrued (a) Dividends Previously Taxed Remittances (d) Interest Royalties, and (1) Other Income License Fees A B Totals (add lines A through C) 2. Foreign Taxes Paid or Accrued (attach schedule showing amounts in foreign currency and conversion rate(s) used) Other Foreign Taxes Paid or Accrued on: () Total Foreign Taxes Paid or Accrued (9) Sales (h) Services Income (i) Other (add columns 2(a) through 20) A B 3. Tax Deemed Paid (see instructions) Totals Part Separate Foreign Tax Credit (Complete a separate Part II for each applicable category of income.) 1a Total foreign taxes paid or accrued (total from Part I, column 2()) b Foreign taxes paid or accrued by the corporation during prior tax years that were suspended due to the rules of section 909 and for which the related income is taken into account by the corporation during the current tax year (see instructions) 2 Total taxes deemed paid (total from Part I, column 3) 3 Reductions of taxes paid, accrued, or deemed paid (enter total from Schedule G) 4 5 6 Taxes reclassified under high-tax kickout Enter the sum of any carryover of foreign taxes (from Schedule K, line 3, column (xiv), and from Schedule 1, Part III, line 3 carrybacks to the current tax year Total foreign taxes (combine lines 1a through 5) Enter the amount from the applicable column of Schedule J, Part I, line 11 (see instructions). If Schedule J is not required to be completed, enter the result from the Totals line of column 18 of the applicable Schedule A Total taxable income from all sources (enter taxable income from the corporation's tax return) Adjustments to line 8a (see instructions) 7 8 b Subtract line 8b from line 8a 9 Divide line 7 by line 8c. Enter the resulting fraction as a decimal (see instructions). If line 7 is greater than line 8c, enter 1 Total U.S. income tax against which credit is allowed (regular tax liability (see section 26(b)) minus any American Samoa economic 10 development credit) 11 Multiply line 9 by line 10 12 Increase in limitation (section 960(c)). Form 1118 (Rev. 12-2020) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2021 McGraw-Hill Education
