Sombrero Corporation, a U.S. corporation, operates through a branch in Espania. Management projects that the companys pretax

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Sombrero Corporation, a U.S. corporation, operates through a branch in Espania. Management projects that the company’s pretax income in the next taxable year will be $100,000, $80,000 from U.S. operations and $20,000 from the Espania branch. Espania taxes corporate income at a rate of 30 percent.

a. If management’s projections are accurate, what will be Sombrero’s excess foreign tax credit in the next taxable year? Assume all of the income is foreign branch income.

b. Management plans to establish a second branch in Italia. Italia taxes corporate income at a rate of 10 percent. What amount of income will the branch in Italia have to generate to eliminate the excess credit generated by the branch in Espania?

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Taxation Of Individuals And Business Entities 2021

ISBN: 9781260247138

12th Edition

Authors: Brian Spilker, Benjamin Ayers, John Barrick, Troy Lewis, John Robinson, Connie Weaver, Ronald Worsham

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