Blue Co is a US corporation with multiple business activities.  On January 1, 2014, Blue Co granted a non-exclusive license of foreign patents to Rosso Ltd., an unrelated foreign corporation.  O n January 1, 2014, Blue Co also acquired a 5-percent interest in Bian Co, a manufacturing corporation organized under the laws of Switzerland.  The remaining 95% of the stock of Bian Co is owned by an unrelated Swiss corporation.  In addition, on January 1, 2014, Blue Co established a sales branch in Germany to handle foreign sales of the products Blue Co manufactures in the United States.  All income (or loss) of the branch is sourced in Germany.

 

Blue Co’s income in 2014 was composed of the following items:

 

-Blue Co received royalties from the license to Rosso of $100,000, which were subject to an Industrial withholding tax of forty percent.

 

-Blue Co’s German sales branch received $100,000 of sales income, on which it paid German corporate income tax of $45,000.

 

-Blue Co received interest income from Bian Co of $150,000 which was subject to a Swiss withholding tax of 10%.

 

-Blue Co had $700,000 of taxable income from its US operations all sourced in the United States.

 

Assume that the U.S. tax rate is 35%.  How much foreign tax will Blue Co be allowed to credit for 2014?  How much tax would be due in the U.S.?

                                                                                                                 

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Blue Co received royalties from the license to Rosso of 100000 which were subject to an Indust... View the full answer