McD Fish n Chips, a U.S.-based company, establishes an operation in Great Britain in January of Year 1, when the exchange rate is US$1.60 per British pound ().

During Year 1, the British branch generates 6,000,000 of pretax income. On October 15, Year 1, 3,000,000 is repatriated to McDs and converted into U.S. dollars. Assume the effective income tax rate in Great Britain is 28 percent. Taxes were paid in Great Britain on December 31, Year 1. Relevant exchange rates for Year 1 are provided here (US$ per ):

January 1. . . . . . . . . . 1.60

Average 30 . . . . . . . . 1.40

October 15 . . . . . . . . 1.30

December 31. . . . . . . 1.20

Assume a U.S. tax rate of 35 percent.

a) Assume that McDs operation in Great Britain is registered with the British government as a branch.

Required: Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to the British branch (all in U.S. dollars).

b) Assume that McDs operation in Great Britain is incorporated as a subsidiary.

Required: Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to the British subsidiary (all in U.S. dollars).