Butler Manufacturing, Inc., a calendar year domestic corporation, operates a branch in Ireland. In the current year, the branch generated 750,000 euros in net profit. On December 31 of the current year, one euro equaled $1.35. The average exchange rate for the current year between the euro and the dollar was $1.25. Write a memo to Margaret Zhang, the controller of Butler, explaining (1) how and when the Irish profits will be taxed to Butler in the United States and (2) under what conditions a foreign currency gain or loss will be recognized.
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