Question
In year 1, USAco has worldwide income of $150,000, including a foreign branch limitation loss of ($100,000), a foreign branch limitation income of $50,000 (on
In year 1, USAco has worldwide income of $150,000, including a foreign branch limitation loss of ($100,000), a foreign branch limitation income of $50,000 (on which USAco paid $12,500 in foreign taxes), $100,000 of passive limitation income (on which USAco paid $10,000 in foreign taxes), and $100,000 of U.S.-source income. In year 2, USAco has worldwide income of $275,000, including $75,000 of foreign branch limitation income, (on which USAco paid $18,750 in foreign taxes) $100,000 of passive limitation income (on which USAco paid $10,000 in foreign taxes), and $100,000 of U.S. source income.
What are USAco’s U.S. tax liabilities for year 1 and year 2? Assume that the U.S. tax rate is 21%. Show your work.
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
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