Krebs, Inc., a U.S. corporation, operates an unincorporated branch manufacturing operation in the U.K. Krebs, Inc., reports $900,000 of taxable income from the U.K. branch on its U.S. tax return, along with $1,600,000 of taxable income from its U.S. operations. The U.S. income and the U.K. branch income are all active business income. Krebs paid $270,000 in U.K. income taxes related to the $900,000 in branch income. Assuming a U.S. tax rate of 21%, what is Krebs’ allowable foreign tax credit?
a. $189,000
b. $270,000
c. $605,000
d. $875,000
e. $315,000
| total tax on taxable income .21x2500000 | 525000 | |||||
| foreign tax credit limit is 900000x.21 | 189000 | |||||
| now the foreign taxes paid is 270000 but it can be claimed upto 189000 credit limit calculated above | ||||||
| hence option a 189000 is the answer | ||||||
| if any doubt please comment | ||||||
Krebs, Inc., a U.S. corporation, operates an unincorporated branch manufacturing operation in the U.K. Krebs, Inc.,...
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