Chipco, a domestic corporation, produces the world’s best tasting chocolate chip cookies. In addition to its domestic sales, Chipco markets its cookies abroad through an extensive network of foreign branch sales offices. Chipco’s operating results for the current year are summarized below, by source and type of income:

U.S.-source manufacturing profits................................................$60 million

Foreign-source manufacturing profits...........................................$40 million

Foreign-source passive investment income ..................................$10 million

U.S. taxable income ....................................................................$110 million

Chipco paid $15 million of foreign taxes on its foreign-source manufacturing profits and $2 million of foreign taxes on its foreign-source passive investment income. Assume that the U.S. tax rate is 35%. Compute Chipco’s total foreign tax credit, as well as the amount of excess credits (or excess limitation) in each separate category of income limitation.

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Foreign tax credit computation is as follows Foreign taxes on foreign source manufacturing ... View the full answer