Transcom, an Ohio corporation, earned $700,000 U.S. source income from sales of goods to U.S. customers and $330,000 foreign source income from sales of goods to customers in Canada. Canada’s corporate income tax rate is 15 percent, and the United States and Canada have a bilateral tax treaty.

a. Compute Transcom’s U.S. tax if it does not maintain a permanent establishment in Canada. Assume the foreign source income does not qualify as FDII.

b. Compute Transcom’s U.S. tax if it does maintain a permanent establishment in Canada.