Question: Georgia Peaches Inc is a large U S peach grower

Georgia Peaches, Inc., is a large U. S. peach grower. Georgia Peaches has U. S.- source income of $ 1.5 billion, faces a of $1.5 billion, faces a U. S. tax rate of 35%, and paid foreign taxes of $ 200 million. The firm also reports $ 500 mil-lion of foreign- source $500mil-lionofforeign-source income on its U. S. return, all in the general basket. It is the first year of Georgia Peaches’ foreign operations, so don’t worry about foreign tax credit carry forwards or carry backs.
a. What is Georgia Peaches’ foreign tax credit, and what is its worldwide tax paid for the year?
b. Now suppose that Georgia Peaches engaged in tax- reduction strategies abroad, reducing its foreign taxes to $ 150 million but holding all else constant. What is Georgia Peaches’ foreign tax credit, and what is its worldwide tax paid for the year?

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  • CreatedAugust 06, 2015
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