1. Xco, a domestic corporation, is an engineering consulting firm that has its main offices in San Francisco, California. Because Xco does a considerable amount of business in China, it has a branch office in Beijing. During the current year, Xco generates a total pre-tax profit of $100 million (all from active business operations), including $80 million of profits from its U.S. operations and $20 million of profits from its foreign branch in China. Assume the U.S. tax rate is 21% and the Chinese rate is 26%.
   1. Compute Xco's creditable foreign income taxes, foreign tax credit limitation, and excess credits (if any).
   2. Now assume that Xco has a second foreign branch office in Singapore which generated $10 million of profits (all from active business operations), on which Xco pays Singapore taxes. Assume the effective Singapore tax rate is 8%.
      • Recompute Xco's creditable foreign income taxes, foreign tax credit limitation, and excess credits.
      • What is the name of the phenomenon by which the Singapore profits resulted in the elimination of the excess credits on the Chinese profits?