Intrepid Industries is a U.S. corporation with $30 million of U.S. source pretax income and an Argentinian branch that has $10 million of pretax income, which is subject to an Argentinian tax rate of 30%. The U.S. corporate tax is 21%.

1. How much taxable income will Intrepid Industries report on its U.S. tax return?
2. How much US tax, after taking into account foreign tax credits, will Intrepid have to pay? What will its effective tax rate be (worldwide taxes divided by worldwide pretax income)?
3. Now assume that in addition to the Argentinian branch, Intrepid also has a Canadian branch with $20 million of pretax income, subject to a 15% Canadian tax. How much US tax, after taking into account foreign tax credits, will Intrepid have to pay? What will its effective tax rate be?

Answer rating: 100% (QA)

To calculate the taxable income US tax liability and effective tax rate for Intrepid Industries in the given scenarios we need to consider the US tax rate foreign tax rates and apply the rules for for... View the full answer