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AAA is a US company. The corporate tax rate is 40% in USA. The company also...

AAA is a US company. The corporate tax rate is 40% in USA. The company also has a 100% owned subsidiary in Canada. The tax rate in Canada is 30%. If for a given year the US company had $100 million of taxable profits from it US operations and additional $50 million of taxable profits from Canada operations. What is the total amount of taxes that the company will pay to IRS for the year assuming that the company paid its Canadian taxes and brought back the profits to US?

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The company has to pay 40% on domestic branch and foreign branch would pay 30% in Canada and 40% in USA but it will give tax credit of 30%paid in Canada as shown below table

USA Branch Canada Branch
Income 100000000 50000000
Tax rate 40% 30%
Tax amount 40,000,000.00 15,000,000.00
Gross income 60,000,000.00 35,000,000.00
Additional tax on foreign earnings 0 20000000
Net income 60,000,000.00 15,000,000.00
Tax credit to foreign company 0 15,000,000.00
Net total income 60,000,000.00 30,000,000.00
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